FRANKFURT (Reuters) – Leaving the European Union or the euro currency does not equate to greater sovereignty for the country involved, which would then become hostage to decisions made elsewhere, the head of the European Central Bank Mario Draghi said on Friday.
With Brexit looming at the of next month and scepticism towards the euro still simmering among the backbenchers of Italy’s ruling coalition, Draghi warned about the risks of going it alone.
He said a country leaving the EU would be faced with the choice of either accepting rules made in Brussels to secure access to the single market or severing ties with its largest trading partners.
“Being outside the EU might lead to more policy independence, but not necessarily to greater sovereignty,” Draghi said in a lecture in Bologna, Italy. “The same is true of the single currency.”
Italy’s ruling League party and 5-Star Movement have ditched pre-election ambitions to leave the euro.
But they have attacked the ECB and the Bank of Italy on issues spanning monetary policy, banking supervision and key appointments at the country’s central bank.
Draghi, himself an Italian, said a country leaving the euro zone would still be affected by the “spillovers” of the ECB’s monetary policy, as was the case with the Bundesbank before the euro’s launch.
“Most countries would no longer benefit from local currency invoicing, which would exacerbate the effects on inflation if they undertook large exchange rate devaluations,” Draghi said.
“And they would be more exposed to monetary policy spillovers from abroad – not least from the ECB itself – which could constrain their domestic policy autonomy.”
(Reporting By Francesco Canepa, Editing by William Maclean)