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

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. 

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Gennaro Zezza
Sergio Cesaratto

Ordinario di Politica monetaria e fiscale europea, Università di Siena, e mail: Cesaratto@unisi.it

Insight - Free thinking for global social progress

Free thinking for global social progress