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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 analyses how Italy's decades-long decline turned the country into the Eurozone's Achilles heel, the most vulnerable spot of the common currency. The paper develops a structuralist framework that synthesizes competing supply-side and demand-side explanations. It argues that domestic structural factors already present in the decades after World War II, including low-cost competition and labour fragmentation, the prevalence of small firms linked to low innovation, and a deep territorial divide, interacted with policy constraints brought about by globalization and European integration. These interactions exacerbated Italy's decline vis-a-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," CIMEO Working Paper Series 171, Centre for Investigation and Modelling of Experimental Observations (CIMEO).
    • Handle: RePEc:ter:wpaper:00171
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    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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