Stronger lira casts a cloud over sunny side of the Alps

The dash for the euro is bringing gloom to South Tyrol.

Bolzano - "There are two sides to this coin," says Richard Seebacher, swivelling in his chair to admire the Rosengarten peak through the window of the Cassa di Risparmio bank.

"For Italian importers, a strong lira in the single currency should be good. But for exporters it is very alarming. We produce 11 per cent of Europe's apples here," he said, turning back to flick through his desk- top news monitor. "Prodi's Euro tax debated," says a headline.

In a warehouse across town,new machines are stamping EU-approved sell-by date stickers on packs of prize golden delicious apples which will be trucked up the Brenner Pass, on through Germany, to the shelves of a Liverpool supermarket. Due to Rome's decision to bring the lira into the exchange-rate mechanism, the producers will get far less for their load than in previous years.

Nervousness about the strengthening lira is evident throughout South Tyrol.

At the parliament of the provincial government, in Bolzano, deputies met last week in solemn mood. They were discussing whether they could raise new taxes to run their bountiful, quasi city-state, in the manner to which the citizens have become accustomed.

"There are many people here who are not happy about trying to force Italy into the EMU first wave," said Mr Seebacher. "And I don't believe we will make it."

The conventional wisdom says that, given the chaos of its national politics, Italy has become wholeheartedly pro-European. As a founder member of the community, the government of Romano Prodi, the Prime Minister, believes Italy has a right to membership of EMU from the start.

In reality, Italy, like other countries, is confused about the sense of the headlong drive for the single currency. And once again, Europe's "citizens" here know their anxieties are not being heard in Brussels. South Tyrol is untypical of Italy; the area was part of Austria-Hungary until the end of the First World War. The concerns do, however, reflect ordinary Italian misgivings about the euro, magnified by proximity to the frontier. South Tyrol is in many respects very pro-European, being in the prosperous north. The vine-draped mountains and the aroma of fresh coffee normally heighten the feel-good factor. Bolzano is "on the sunny side of the Alps".

But the region's economy is heavily reliant on tourism, with 70 per cent of visitors coming from Germany. A downturn has already been noticed this year as the lira has strengthened.

The region's native German-speaking population has a strong historical interest in cementing ties with Austria and Bavaria, seeing European integration as a way to blur state boundaries. The South Tyrolese have won autonomy from Rome, as well as large subsidies.

However, precisely because South Tyrol has prospered under its autonomous government it resents what it sees as a "political" diktat from Rome over belt-tightening for the single currency. Those driving the euro bandwagon in Bonn and Paris scorn countries who engage in "competitative devaluation". But in Bolzano the freedom to weaken the lira is seen as a valuable tool which has brought a mini-boom.

New economic hardship is likely to hit South Tyrol's less privileged ethnic Italians first, and extreme right Italian nationalist politicians here are exploiting popular discontent.

"People hate the Euro-tax. They are angry that a reduction in employment and cuts in state social spending is the price we are having to pay for the euro," said Luigi Schiatti, of the post-Fascist Unitalia political party.

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