Breakaway Currencies

We’ve explored nine different scenarios in which we’ve imagined a region has decided to create a new currency. Read more about breakaway currencies or select another scenario from the list below to view in more detail.

In collaboration with Dr Robert Hancké of the London School of Economics, the UK’s No. 1 retail forex provider,1 IG, has considered...

What happens if Sicily leaves Italy and creates a new Sicilian lira?

Breakaway region Sicily

Parent country Italy

Old currency Euro (EUR)

New currency New Sicilian Lira

Sicily map image

Economically weak regions can potentially make themselves more competitive by creating their own currency. But does Sicily have what it takes to make the most of financial independence?

Why might Sicily create its own currency?

  • Sicily’s economic and political integration into the rest of Italy has historically always been incomplete, for geographic and political-economic reasons
  • It is among the economically weakest regions in the G7
  • A separate currency would allow the region to choose a more competitive exchange rate that is less influenced by the relatively strong regions in the north
Sicily’s economy is dominated by agriculture and other low-productivity sectors.

Why is Sicily’s position weak?

  • There’s been little to no significant industrial development during the postwar era
  • The strength of mafia activity in the region has resulted in resources ending up in the wrong places
  • Endemic state weakness has hindered the development of a sustainable economic growth path
GDP per capita 2015 (€)   source
EU average

What could happen... Sicily?

A weaker currency, with a lower exchange rate, could instantly improve Sicily’s export competitiveness

Since much of Sicily’s economy is in low-productivity sectors such as construction, agriculture, and public services, an independent currency is likely to lead to a significant drop in living standards Italy?

It’s unlikely that Sicily’s example will be followed by other Italian regions; Sicilian independence would probably not cause the country to break up

But Italy itself might follow Sicily’s example and leave the eurozone if the exchange rate depreciation bears fruit

Currency background

Change in value of euro (EUR) since 2000, based on SDRs per currency unit   source

Change in value of euro (EUR) since 2000

Dr Robert Hancké

“The region has relatively few potential growth industries of the kind for which a softer currency would be more appropriate.”

What would the political impacts be?

A break-up of the rest of the country is unlikely, not least because Sicily is an island and therefore has no land borders with the rest of Italy

It might trigger similar reactions from other weak regions in Europe that feel trapped in their current currency regime

Would the pros outweigh the cons?

The Sicilian economy may be structurally too weak to benefit from an autonomous currency

Problems of resource diversion through corruption are likely to remain a significant issue

Dr Robert Hancké is an Associate Professor of Political Economy at the London School of Economics. His research interests include the political economy of advanced capitalist societies and transition economies as well as macroeconomic policy and labour relations.

Choose another breakaway currency

World map