The reform of the Italian economy is critical to the survival of the euro. But success also depends on external factors out of the Italians’ control.
Why stay in Europe, where we have no power and influence, and where control is exercised by the French and the Germans, acting through the Commission in Brussels and the European Central Bank?"
The PSDI is a small party with little political influence, having been sidelined by the rise of Berlusconi's Forza Italia party. Its new policy is notable because it suggests a growing eurosceptic sentiment in Italy.
Fitch has described Italy as the battleground for the survival of the Euro. In a note, the agency said: "The future of the euro will be decided at the gates of Rome," describing it as "the frontline of the crisis". Fitch has Italy rated A+ on negative watch, but predicted the country would hold together and would avoid defaulting on sovereign debt.
Erik Nielsen, head of economics and fixed income at UniCredit, dismissed the notion that Italy would default. At a Fitch roadshow in London, he said Italy's 2011 export growth to November was about double the UK's.
"Yet it is stunning that people have pre-set views in their minds that sidetrack their analysis. If people say there is a significant risk of a downgrade, it becomes a self-fulfilling prophecy. There is clearly a buyers' strike out there, and no one wants to be the first."
David Riley, Fitch's head of global sovereign ratings, said that as Italian bonds get cheaper, buyers become scarce. The widening spreads, far from being seen as an investment opportunity, are stoking fears that Italy is insolvent.
Nielsen added: "Spreads over 400bps can only be sustained for a period of time. The concern is not only whether Italy is too big to fail, but is it too big to save? It is difficult to foresee a rescue package big enough to save it."
In a report published in November last year, Barclays Capital says confidence lies at the heart of the Italian debt problem. In theory, Italian policy reforms could generate a large enough confidence boost to push Italy back on track.
"But we find this highly unlikely," Barclays adds. "Confidence is weak not only about policy settings, but also about the capacity of policy reforms to put Italy back onto a clearly sustainable fiscal trajectory."
Too often, reform efforts have failed because the problem was simply too big to be addressed by policy reforms that arrived too late or poorly implemented.