Capo Boi

Now, I'm not for a moment suggesting that Italy will abandon the euro (in fact I believe the contrary), but just for the sake of it, one of the biggest losers would potentially be house owners with a euro mortgage through a UK bank. On the adoption of "the new lire" its very likely that Italian banks would rebase both assets and liabilities. So for anyone with a euro mortgage through an Italian bank it would rollover into a new lire mortgage. However, it definitely can't be taken for granted that UK banks would adopt the same proceedures. I would even say that it would be very surprising if they did. So you get to the situation where someone still has to pay off their mortgage in euros and the value of their debt has risen by the amount of an Italian lire devaluation. Its not quite, but almost similar to the problem that lots of people are having in Cyprus with swiss franc mortgages. Don't want to be doom and gloom but if there is a choice and it is possible, it may be better to have a mortgage with a domestic lender. Anyway just my thoughts so feel free to shoot me down but this is what happened in Argentina. Following the Argentinian default ten years ago, US dollar mortgages on Argentinian property by US lenders, still had to be paid in the hard US dollar and not in the new peso.

jiminalpago

Perhaps 2 weeks ago a guest on Balerò (lady, very impressive) analysed the Greek situation in the same terms. Frightening.
Like you, I think Italy will stay in the Euro.

modicasa

Stay in the euro presupposes that there will be a euro to stay in, and/or that Italy is permitted to stay in the new smaller Germanic eurozone..
its going to be a bumpy night....

Capo Boi

Very true Modicasa.
If the whole thing were to break up, The easiest option would be for all countries to leave at the rate they joined. In Italy's case Lire 1936. I think the effect would be the same as a new lire would probably have an instant devaluation against £ of something like 25% maybe more maybe less but a significant devaluation and the UK banks could hold you to the L1936 joining rate. What I'm trying to say is that it's not given for people with a euro mortgage from a UK or US bank that assets and liabilities will move together. Nor am I trying to scare anyone, but the Swiss franc mortgage problem in Cyprus, for example, is relevant. Anyway, nice and sunny here. Been for a swim today.

modicasa

But wouldn't that be the most absurd thing to do - Im talking about having a new lira which replicated the old one... instead of 2000 lire to the pound, say - why not have 200 or 20, something without the zero's? But oh no - they want to print notes of ridiculous amounts because it makes them feel rich - thats my theory!

chris120

the situation you describe has already happened; in the years just before Italy joined the euro and salaries were still paid in lire many italians took out mortgages in Euros and as the Lire/Euro exchange rates moved against the lire they ended up owing more and more each year despite paying the premiums.

Marocco

That was actually the ECU, a forerunner of the euro. It was a basket of currencies of what was later to become the EU (the GBP was also in the basket). In the late 80's, some banks offered ECU denominated mortgage. This 1989 article mentions the dangers involved:

http://ricerca.repubblica.it/repubbl...perche-ha.html