The roots of the Italian Stagnation

CEPR Policy Insight No 66

Paolo Manasse

Italy is currently facing its worst recession in recent history, having lost about 8.5 percent of GDP between 2007 and 2013 cumulatively. The current situation is, to a large extent, the result of the European sovereign debt crisis and to the tough fiscal austerity measures introduced simultaneously in Europe, and particularly in Italy. In the latest Policy Insight "The roots of the Italian Stagnation" Paolo Manasse argues that the inability of the Italian economy to pull itself out this recession is largely due to the legacy of the past "lost decade" of missed reforms, a large competitiveness gap, and earnings growth totally decoupled from productivity and market pressure. The crisis brought to light and made more dramatic the problems Italy has ignored for too long.