The Euro Area’s Achilles Heel: Reassessing Italy’s Long Decline in the Context of European Integration and Globalisation

Dario Guarascio, Philipp Heimberger and Francesco Zezza

No 470, wiiw Research Reports from The Vienna Institute for International Economic Studies, wiiw

Abstract: This paper analyses how Italy’s decades-long decline turned the country into the euro area’s Achilles heel, the most vulnerable spot in the common currency. We use a structuralist framework to synthesise different (competing) supply-side and demand-side explanations, accounting for long-term processes and sectoral interdependencies. We argue that structural domestic factors that were already present in the decades after World War II (‘original sins’) – low-cost competition and labour fragmentation, many small firms linked to low innovation, and a deep territorial divide – interacted with the policy constraints brought about by globalisation and European integration to exacerbate Italy’s decline vis-à-vis its euro area peers.

Keywords: Italy; decline; euro area; crisis (search for similar items in EconPapers)
JEL-codes: E65 F45 F62 P16 (search for similar items in EconPapers)
Pages: 41 pages including 4 Tables and 7 Figures
Date: 2023-07
New Economics Papers: this item is included in nep-his and nep-int
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