Yet the analogy with Argentina might have been closer still had Italy retained the lira, and thus been subject to the same sort of speculative pressure that eventually broke Argentina's link to the dollar.

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Without necessary reforms, eventually this vicious circle of stagdeflation would force Italy to exit EMU, return to the Lira and default on its Euro debts.

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Last autumn saw tense negotiations between Germany, on one side, and Italy on the other about the proper rate for the lira.

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If, say, German interest rates climbed steeply and Italy was forced to raise its own to maintain the lira's stability, its budget deficit would rise.

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He liked to portray himself as a pro-business liberal reformer but under him Italy has utterly failed to abandon a model that used lira devaluations to offset inflation and stagnant or falling productivity.

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Had it failed, the combination of a political crisis in Rome and global financial trouble would have put the lira and Italian interest rates under heavy pressure, jeopardising Italy's chances of joining the euro at a later date.

ECONOMIST: Italy