Europe heading for 'cataclysmic event' warns Nobel prize-winning economist
Italy's crucial forthcoming referendum, proposing changes to its parliamentary structure could be the "cataclysmic event" which brings an end to the European Union and the euro currency, according to Nobel prize-winning economist Joseph Stiglitz. His comments coincide with a summit between Italian Prime Minister Matteo Renzi, German Chancellor Angela Merkel and French Prime Minister Francois Hollande. It also follows warnings we noted by Sarah Gordon of The Financial Times this month that Italy's banking crisis is spreading and could lead to upending the eurozone's political as well as its economic future.

Joseph Stiglitz (pictured) said another 'disastrous' political event such as Brexit would trigger the collapse

Europe is hurtling towards a 'cataclysmic event' that will destroy the euro and kill off the European Union, a Nobel prize-winning economist has predicted.

The American Joseph Stiglitz said another 'disastrous' political event such as Brexit would trigger the collapse.

He said there was a real danger that problems caused by the single currency would cause the hostility necessary to bring down the European project and its 'liberal values'.

In a worrying forecast for the EU, he said there will be a 'definite consensus' that Europe is not working.

And he suggested Italy's crucial referendum - which proposes changes to its rigid parliamentary structure - could be the 'catalyst' for change in Europe because it would lead to the resignation of Prime Minister Matteo Renzi and open the door to political forces forcing Italy out of the euro.

Speaking about the future of the EU in an interview with Business Insider, Mr Stiglitz said: 'I think the most likely thing is something along the lines of a political cataclysmic event like Brexit.

'In other words, the eurozone's member countries are democracies and one sees increasing hostility to the euro, which is unfortunately spilling over to a broader hostility to the broader European project and liberal values.'

He went on: 'That's going to be the end. What's going to happen is that there will be a definite consensus that Europe is not working.

'The diagnosis will be to shed the currency and keep the rest, or that Europe is not working and a broader rejection — like in the UK.

Joseph Stiglitz suggested Italy's crucial referendum - which proposes changes to its rigid parliamentary structure - could be the 'catalyst' for change in Europe because it would lead to the resignation of Prime Minister Matteo Renzi (pictured with German Chancellor Angela Merkel in Italy today) and open the door to political forces forcing Italy out of the euro

'So my worry that this is precisely that kind of political event [something like Brexit] is that is what will be the catalyst for change.'

Asked if Italy's problems could be the catalyst, Mr Stiglitz said: 'That is a big risk.

'Many people are now trying to work with Matteo Renzi [Italy's prime minister] to have him climb down from his commitment that he will resign if his referendum fails.'

Mr Stiglitz was speaking as he unveiled his new book - The Euro: How A Common Currency Threatens the Future of Europe - which blames the single currency for causing economic suffering across Europe and for making progressive policies impossible to pursue.

His comments came as the leaders of the EU's three biggest countries met for crisis talks in Lazio today as they scramble to save the Brussels project from unravelling after Brexit.

Italian Prime Minister Mr Renzi invited German Chancellor Angela Merkel and Francois Hollande to Ventotene, a tiny island off the coast of Naples, to discuss their strategy ahead of next month's crucial summit of all 28 leaders.

The leaders of the EU's three biggest countries met for crisis talks on the Italian island of Ventotene (pictured) today as they scramble to save the Brussels project from unravelling after Brexit

The three leaders, who are all facing vital elections over the next year in their own countries, will also address Europe's response to the refugee crisis, the continent's ongoing economic woes and security on the continent in the wake of a string of terror attacks in French and German cities last month.

The aim of the summit on Ventotene today is to demonstrate the unity of Europe's three biggest countries and three of the founding nations of the EU, but it is likely to attract questions over the elitist nature of the meeting.

As attention turns to the intense preparations for Britain's departure from Brussels in the coming weeks and months, the Swedish prime minister warned Britain not to cut corporation tax or it will face tougher negotiations with the EU.

Stefan Loefven said suggestions Britain could offset any economic costs of leaving the EU by cutting business rates to attract investment would make Brexit talks 'more difficult' and will harm relations with the bloc.

He also urged British PM Theresa May to get on with triggering Article 50 - the formal process for starting the two-year process of leaving the EU - telling Bloomberg that Brexit 'shouldn't take longer than necessary'.

'But if the UK wants some time to think about the situation, this will also give EU countries some time,' Mr Loefven added.

Francois Hollande (left), Angela Merkel (middle) and Matteo Renzi (right) were pictured today as they met for crisis talks in Lazio to plot a way forward for the European Union

Italian PM Matteo Renzi (left) and French President Francois Hollande (right) arrive for their meeting with German Chancellor Angela Merkel on the Italian island of Ventotene today

'On the other hand, you hear about plans in the U.K. to, for example, lower corporate taxes considerably.

'If they, during this time, begin that kind of race, that will of course make discussions more difficult.'

Today's summit in Ventotene is the first in a number of intense meetings of talks between European leaders, who are returning from their summer holidays to forge a new way forward after Britain's dramatic decision to quit the EU in June.

The location of the exclusive meeting is hugely symbolic; Ventotene was seen as playing a part in the formation of the EU.

One of the EU's founding fathers, Altiero Spinelli, wrote a manifesto for a federal Europe while he was imprisoned on the island off the coast of Naples during the second world war along with fellow intellectual Ernesto Rossi.

A French diplomatic source told the Guardian the summit aims 'to show the unity of Europe's three biggest countries, but not to create a specific club'.