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

Author

Listed:
  • Dario Guarascio
  • Philipp Heimberger

    (The Vienna Institute for International Economic Studies, wiiw)

  • Francesco Zezza

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.

Suggested Citation

  • Dario Guarascio & Philipp Heimberger & Francesco Zezza, 2023. "The Euro Area’s Achilles Heel: Reassessing Italy’s Long Decline in the Context of European Integration and Globalisation," wiiw Research Reports 470, The Vienna Institute for International Economic Studies, wiiw.
    • Handle: RePEc:wii:rpaper:rr:470
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    More about this item

    Keywords

    Italy; decline; euro area; crisis;
    All these keywords.

    JEL classification:

    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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