Italy: A Question of Interest Rates and Trust

• Published in: Inter economics Vol. 53; no. 6; pp. 294 - 295
• Main Author: Cesaratto, Sergio
• Format: Journal Article
• Language: English
• Published: Heidelberg Springer 01-11-2018; Springer Berlin Heidelberg; Springer Nature B.V
• Subjects: Austerity policy; Budgets; Competition; Crisis management; Economic development; Economic Policy; Economics; Economics and Finance; Economists; Editorial; European Integration; European Monetary Union; GDP; Government bonds; Gross Domestic Product; Interest rates; Italy; Labor Economics; Labor productivity; Labor supply; Payments; Public debt; Social Policy; Supply-side economics; Italy; Europe; Germany
• ISSN: 1613-964X; 0020-5346; 1613-964X
• DOI: 10.1007/s10272-018-0769-9

Contrary to the image generally portrayed to Northern European countries, Italy is not a fiscally profligate country. Indeed, Italy has a record of primary fiscal surpluses (balances that exclude interest rate payments) since 1992; only Germany can make a similar claim. Regrettably, this uninterrupted series of budget surpluses was accompanied by a loss of external competitiveness due to the approaching and later adoption of the euro since 1995. These two factors combined to form the deep root of the long-term sluggishness of the Italian economy, particularly of its labour productivity stagnation. The supply side factors do matter, of course, given the increased global competitive environment, but the demand side factors are the main drivers of this development.