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How Italy can benefit from a weak Euro

The ups and downs of the currency can be positive, but countries should continue focusing on reforms and competitiveness

How Italy can benefit from a weak Euro

Claudia Astarita

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According to the European Central Bank President Mario Draghi, the weak Euro is a very useful tool to boost European economy, a condition that can actually multiply the already positive impact of the stimulus the Bank has recently approved to support regional growth. In Italy as well as in other EU countries, the currency's plunge has been emphasized as a favourable condition to help nations to re-emerge from the record-long recession that followed 2008 global financial crisis.

According to Bloomberg, "the euro has plunged about 11 percent against the dollar this year and is the worst performer among a basket of peers measured by Bloomberg Correlation-Weighted Indexes".

The problem for Italy is that with more than 40 percent of the nation's exports going to other euro countries, the benefits for most of its companies are limited. At the moment, only Italian most famous business leaders are seeing things differently. "Fiat Chrysler Automobiles NV Chief Executive Officer Sergio Marchionne said last month that the cheaper euro will help sales of Jeep Renegade, the first Jeep model exclusively built outside North America. For Ferrari, controlled by Fiat, the weaker exchange rate also means a profit-margin boost on U.S. sales".

Lots of big companies believe that this is a favourable time for Italy. Among those celebrating the latest currency-market developments in Europe are the king of linen and silk sweaters Brunello Cucinelli, the Milan-based drink maker Davide Campari-Milano S.p.A, and in general all other luxury-goods company, that are doing well in both Asia and the US.

Bloomberg calculated that "Italian exports to countries outside euro region totalled 238 billion euros in 2014, up 1.5 percent from the previous year", but data for 2015 have so far been mixed, and forecast not particularly promising, with experts stressing that "even those benefiting from the weaker euro may find the boon is short-lived, with analysts and economists at Italy's largest bank forecasting a reversal for the currency". An option suggesting that Italy should not rely too much on the ups and downs of its currency, but continue focusing on reforms and competitiveness.

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