The Eurozone's Achilles heel: Reassessing Italy's long decline in the context of European integration and globalization

Dario Guarascio, Philipp Heimberger and Francesco Zezza

No 238, Working Papers in Public Economics from Department of Economics and Law, Sapienza University of Roma

Abstract: This paper analyzes how Italy's decades-long decline turned the country into the Eurozone's Achilles heel, the most vulnerable spot of the common currency. We use a new structuralist framework to synthesize different (competing) supply-side and demand-side explanations. 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 globalization and European integration to exacerbate Italy's decline vis-à-vis its large Eurozone peers.

Keywords: Italy; decline; Eurozone; crisis (search for similar items in EconPapers)
JEL-codes: F02 F15 F45 F55 (search for similar items in EconPapers)
Pages: 35
Date: 2023-03
New Economics Papers: this item is included in nep-his and nep-int
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