(Let me apologize for posting here. I think that this is a very important problem that is not being discussed: exit from the euro is expropriating savings. Also, please apologize that I cannot place links. )
As you know, the next government is considering leaving the euro. Then, the new currency would be devaluated (something like 30 %) thus expropiating one's savings.
Therefore, one should save one's money out of Italy to avoid this large loss.
Italy has had a structural problem of competitiveness, of internal barriers to competition. This can be seen in the past deficits of current account (see Italy Current Account | 1942-2018 | Data | Chart | Calendar | Forecast specially the years 2004-2006). That is, Italians buy foreign goods of better price, and more money flows out of Italy than to Italy. As a consequence, Italy has a net foreing position of -114000 million euro (negative, that is net debt, it can be found, for instance, in Eurostat ) . However, with the recent structural reforms, things have improved. Italy had a current account surplus of 11 % GDP during 2017 and the net foreign debt is decreasing quickly, it was 165000 at the end of 2016.
However, the new goverment pretends to reverse all these impopular structural reforms. Then, staying in the euro is imposible. It is not a matter of negotiating. It is the simple fact that sharing currency implies sharing levels of competitiveness, otherwise one buys foreing goods rather than national ones, there is a flow of money otherwards the country, shown as deficit of current account, and this is unsustainable without devaluating currency.
So it is very likely that Italy will leave the euro and the prudent saver should move his money abroad.
Here this report by Willem Buiter, chief economist of Citibank, about the case of Greece, is very helpful
"A Greek Exit from the Euro Area: A Disaster for Greece, a Crisis for the World"
Also note, that in order to avoid a bank run, an exit from the euro will be denied until the last minute. Do not be fooled by government denials, unless there clear plans to be competitive within the euro.
What are the options?
I would open a bank account in any European bank. The eurozone is an area of free movement of capitals, so one can save his money where one prefers. With a debit card, one can spend money in Italy and buy goods with it.
Here are some suggestions:
- German bank N26: one can open a free current account with debit card. Very convenient.
- ABN AMRO from Netherlands. It has a fee of about 1.40€/month
- Open a forex account at Swissquote (no need to trade currency)
It is likely that the Italian government will try to put a tax on these foreing accounts. In case there is a friendly exit from euro, and foreing goverments cooperate with Italy in the expropiation of savings, an additional safety would be to invest in low risk bonds. Conversion of these into national currency would be a severe violation of legal security.
The safest places would be those that have incentives to be perceived as safe for the saver. For instance, Switzerland or the Channel Islands.
Do not wait until the last minute. It is likely that capital controls will be put in place to avoid that you protect your savings.
As you know, the next government is considering leaving the euro. Then, the new currency would be devaluated (something like 30 %) thus expropiating one's savings.
Therefore, one should save one's money out of Italy to avoid this large loss.
Italy has had a structural problem of competitiveness, of internal barriers to competition. This can be seen in the past deficits of current account (see Italy Current Account | 1942-2018 | Data | Chart | Calendar | Forecast specially the years 2004-2006). That is, Italians buy foreign goods of better price, and more money flows out of Italy than to Italy. As a consequence, Italy has a net foreing position of -114000 million euro (negative, that is net debt, it can be found, for instance, in Eurostat ) . However, with the recent structural reforms, things have improved. Italy had a current account surplus of 11 % GDP during 2017 and the net foreign debt is decreasing quickly, it was 165000 at the end of 2016.
However, the new goverment pretends to reverse all these impopular structural reforms. Then, staying in the euro is imposible. It is not a matter of negotiating. It is the simple fact that sharing currency implies sharing levels of competitiveness, otherwise one buys foreing goods rather than national ones, there is a flow of money otherwards the country, shown as deficit of current account, and this is unsustainable without devaluating currency.
So it is very likely that Italy will leave the euro and the prudent saver should move his money abroad.
Here this report by Willem Buiter, chief economist of Citibank, about the case of Greece, is very helpful
"A Greek Exit from the Euro Area: A Disaster for Greece, a Crisis for the World"
"The instant before Greece exits it (somehow) introduces a new currency (the New Drachma or ND, say). Assume for simplicity that at the moment of its introduction the exchange rate between the ND and the euro is 1 for 1. This currency then immediately depreciates sharply vis-à-vis the euro (by 40 percent seems a reasonable point estimate). All pre-existing financial instruments and contracts under Greek law are redenominated into ND at the 1 for 1 exchange rate.
What this means is that, as soon as the possibility of a Greek exit becomes known, there will be a bank run in Greece and denial of further funding to any and all
entities, private or public, through instruments and contracts under Greek law. Holders of existing euro-denominated contracts under Greek law want to avoid their
conversion into ND and the subsequent sharp depreciation of the ND. The Greek banking system would be destroyed even before Greece had left the euro area.
There would remain many contracts and financial instruments involving Greek private and public entities denominated in euro (or other currencies, like the US dollar) that are not under Greek law. These would not get redenominated into ND. With part of their balance sheet redenominated into ND which would depreciate sharply and the rest remaining denominated in euro and other currencies, any portfolio mismatch would cause disruptive capital gains and losses for what’s left of the Greek banking system, Greek non-bank financial institutions and any private or public entity with a (now) mismatched balance sheet. Widespread defaults seem certain.
As discussed in Buiter and Rahbari (2011), we believe that the improvement in Greek competitiveness that would result from the introduction of the ND and its sharp depreciation vis-à-vis the euro would be short-lived in the absence of meaningful further structural reform of labour markets, product markets and the public sector. Higher domestic Greek ND-denominated wage inflation and other domestic cost inflation would swiftly restore the old uncompetitive real equilibrium or a worse one, given the diminution of pressures for structural reform resulting from euro area exit."
What this means is that, as soon as the possibility of a Greek exit becomes known, there will be a bank run in Greece and denial of further funding to any and all
entities, private or public, through instruments and contracts under Greek law. Holders of existing euro-denominated contracts under Greek law want to avoid their
conversion into ND and the subsequent sharp depreciation of the ND. The Greek banking system would be destroyed even before Greece had left the euro area.
There would remain many contracts and financial instruments involving Greek private and public entities denominated in euro (or other currencies, like the US dollar) that are not under Greek law. These would not get redenominated into ND. With part of their balance sheet redenominated into ND which would depreciate sharply and the rest remaining denominated in euro and other currencies, any portfolio mismatch would cause disruptive capital gains and losses for what’s left of the Greek banking system, Greek non-bank financial institutions and any private or public entity with a (now) mismatched balance sheet. Widespread defaults seem certain.
As discussed in Buiter and Rahbari (2011), we believe that the improvement in Greek competitiveness that would result from the introduction of the ND and its sharp depreciation vis-à-vis the euro would be short-lived in the absence of meaningful further structural reform of labour markets, product markets and the public sector. Higher domestic Greek ND-denominated wage inflation and other domestic cost inflation would swiftly restore the old uncompetitive real equilibrium or a worse one, given the diminution of pressures for structural reform resulting from euro area exit."
Also note, that in order to avoid a bank run, an exit from the euro will be denied until the last minute. Do not be fooled by government denials, unless there clear plans to be competitive within the euro.
What are the options?
I would open a bank account in any European bank. The eurozone is an area of free movement of capitals, so one can save his money where one prefers. With a debit card, one can spend money in Italy and buy goods with it.
Here are some suggestions:
- German bank N26: one can open a free current account with debit card. Very convenient.
- ABN AMRO from Netherlands. It has a fee of about 1.40€/month
- Open a forex account at Swissquote (no need to trade currency)
It is likely that the Italian government will try to put a tax on these foreing accounts. In case there is a friendly exit from euro, and foreing goverments cooperate with Italy in the expropiation of savings, an additional safety would be to invest in low risk bonds. Conversion of these into national currency would be a severe violation of legal security.
The safest places would be those that have incentives to be perceived as safe for the saver. For instance, Switzerland or the Channel Islands.
Do not wait until the last minute. It is likely that capital controls will be put in place to avoid that you protect your savings.
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