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What went wrong with Italy, and what the country should now fight for in Europe

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  • Sergio Cesaratto
  • Gennaro Zezza

Abstract

In this paper we briefly review the evolution of the Italian economy in the post-war period, discussing the shift from a first period when fiscal policy was targeted - among other things - at full employment, to a later period when controlling inflation through a "foreign discipline" became the main policy target. We review critically the literature on the Italian productivity slowdown, suggesting that it neglects the role of aggregate demand, and of labor market reforms, on productivity. Finally, we discuss Eurozone imbalances, suggesting that Eurozone institutions adopt new rules to keep the interest rate low enough to make public debt sustainable, while using fiscal policy to stimulate growth.

Suggested Citation

  • Sergio Cesaratto & Gennaro Zezza, 2018. "What went wrong with Italy, and what the country should now fight for in Europe," FMM Working Paper 37-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    • Handle: RePEc:imk:fmmpap:37-2018
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    2. Marc Lavoie, 2015. "The Eurozone Crisis: A Balance-of-Payments Problem or a Crisis Due to a Flawed Monetary Design?," International Journal of Political Economy, Taylor & Francis Journals, vol. 44(2), pages 157-160, April.
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    9. Nadia Garbellini & Enrico Marelli & Ariel Luis Wirkierman, 2014. "Domestic demand and global production in the Eurozone: A multi-regional input-output assessment of the global crisis," International Review of Applied Economics, Taylor & Francis Journals, vol. 28(3), pages 336-364, May.
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    11. Gustav A. Horn & Fabian Lindner & Sabine Stephan, 2017. "The Role of nominal wages in trade and current account surpluses," IMK Report 125e-2017, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
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    Cited by:

    1. Bramucci, Alessandro, 2023. "In search of a growth model for Italy: The failed attempt of an export-led recovery strategy?," IPE Working Papers 205/2023, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    2. Stefano di Bucchianico, 2019. "A bit of Keynesian debt-to-GDP arithmetic for deficit-capped countries," Bulletin of Political Economy, Bulletin of Political Economy, vol. 13(1), pages 55-83, June.
    3. Orsola Costantini, 2020. "The Eurozone as a Trap and a Hostage: Obstacles and Prospects of the Debate on European Fiscal Rules," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 55(5), pages 284-291, September.
    4. Servaas Storm, 2019. "Lost in deflation: Why Italy`s woes are a warning to the whole Eurozone," Working Papers Series 94, Institute for New Economic Thinking.

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    More about this item

    Keywords

    Italy; stagnation; Eurozone; imbalances;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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