Where does the Italian public stand on Europe and the Maastricht treaty? And why is EMU not an issue in the political debate in Italy? Some domestic context may provide answers: the EMU issue in Italian political debate must be viewed against the background of a system that has profoundly changed since the collapse of international communism in 1989 and the subsequent epoch-making revelations of widespread financial corruption.

The result has been that Italy’s European aspirations have repeatedly had to give way to pressing domestic political dilemmas. Recently, for example, there were strong pressures to avoid elections during the Italian Presidency of the European Union in the first half of 1996. This followed the resignation of Lamberto Dini’s government at the end of 1995 once it had fulfilled its parliamentary mandate. But all attempts to prolong Dini’s mandate, as well as to form a broad-based government charged with overseeing constitutional reforms, failed to achieve widespread support.

Even more recently, the new Prime Minister Romano Prodi has declared his government’s full support for EMU and strong resolve for getting Italy in as soon as possible. At the same time, he has admitted that participation in the first round of EMU might be hard to achieve.

To most Italians, Europe is synonymous with a more efficient and more modern administration. The European Commission is often regarded as a welcome external monitor of Italian governments. And the growth of markets and mobility that comes with the process of European integration is cherished by many.

The Italian public tends to believe that so far, Europe has brought more benefits than costs to the country. This may well have been the case to date since Italy has not experienced any dramatic restructuring of its productive sector as a result of European integration. The absence of significant industrial restructuring could also be due to the fact that the traditionally less efficient industries were almost exclusively government-owned and therefore enjoyed the protection of government procurement as well as market restrictions.

Attitudes towards EMU are a bit more mixed. On the one hand, public opinion seems to prefer a single European currency over the Italian lira since the former is viewed as less vulnerable to manipulation. On the other hand, some politicians and trade union leaders have in the past voiced concern that the fiscal adjustment needed to meet the Maastricht criteria on excessive deficits would be socially unacceptable. Other observers believe that Italy still needs the flexibility afforded by discretionary use of the foreign exchange rate.

Yet Europe and EMU have been largely absent from the Italian political debate. The most telling example of the indifference of Italian politicians towards European issues was the debate in Parliament on the ratification of the Maastricht treaty in the autumn of 1992. Some on the hard left and hard right were opposed to ratification, but the general popular reaction was indifference.

There has been a revival of criticism of Maastricht in recent months: some have advocated a rewriting of the treaty; others have claimed that the convergence criteria are unjustified or unacceptable. But as the latest electoral campaign heated up, EMU again failed to capture centre stage. This experience is clearly very different from that of the UK or even of France.

So why this indifference? There are three possible explanations.

‘The costs and benefits of monetary union are not understood’: since the accumulated stock of government debt is so large, fiscal retrenchment is a domestic priority in Italy whatever the requirements of the Maastricht treaty. As a result, it is quite possible that the public views the EMU project independently of the fiscal convergence criteria. Setting aside the Maastricht criteria, the distribution of long-run economic costs and benefits of monetary union is not known. Hence, if some of the Maastricht criteria are viewed as desirable independently of EMU, monetary union cannot readily become a political issue.

‘Italy has other problems to worry about’: the Italian political debate has been dominated by the issues related to the transition from the political system of the post-war years – characterized by a very large public sector and overly powerful political parties – to a new regime that should be characterized by a much smaller government sector and weaker party influence on electoral outcomes. This transition is proving to be longer and more painful than many originally expected.

‘Italy has a very short history as a nation-state and it has never been an active player in international issues’: there is certainly some truth in this view, even given the experiences of two world wars.

The first argument is the most plausible explanation of the lack of a political debate on EMU. One unfortunate and paradoxical corollary of this argument is, however, that EMU could become the centrepiece of the political debate for the wrong reasons. Since nobody understands the economic effects of a single currency, EMU could be used either as a rallying point or as a demon by politicians willing to establish a link, however arbitrary and tenuous, between that project and the cause that he or she espouses. Indeed, such a phenomenon can be observed in the UK.

So EMU could yet become a domestic political issue – and add further confusion to Italian politics. So far, however, Italian politicians have demonstrated good judgement and avoided that trap.

The author is based at Long-term Capital Management in London. He is also a Research Fellow in CEPR’s International Macroeconomics programme. The opinions expressed in this article are the author’s own, not those of any of the institutions with which he is affiliated.