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

Author

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  • Dario Guarascio
  • Philipp Heimberger
  • Francesco Zezza

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.

Suggested Citation

  • Dario Guarascio & Philipp Heimberger & Francesco Zezza, 2023. "The Eurozone's Achilles heel: Reassessing Italy's long decline in the context of European integration and globalization," Working Papers in Public Economics 238, Department of Economics and Law, Sapienza University of Roma.
    • Handle: RePEc:sap:wpaper:wp238
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    More about this item

    Keywords

    Italy; decline; Eurozone; crisis;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F15 - International Economics - - Trade - - - Economic Integration
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements

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