Introduction

Italy’s economic issues stem from a combination of long-standing structural problems and more recent crises. The roots of these challenges can be traced back several decades, but they have become more pronounced in recent years.

Historical Context

Italy’s economic difficulties began to emerge significantly in the 1970s:

Total factor productivity, a measure of technological advancement and innovation, has stagnated since the mid-1970s.

From the 1970s onwards, Italy artificially propped up its GDP growth through continuous currency devaluations and expansion of public debt.

Structural Issues

Several deep-seated problems have contributed to Italy’s economic challenges:

Low productivity growth, particularly among small and unproductive firms

Lack of domestic market competition

Policy capture by interest groups and lobbies

Inefficient public administration

Regulatory barriers to competition in services

Recent Crises

Italy has faced a series of economic shocks in the past 15 years:

Global Financial Crisis (2008-2009)

Sovereign debt crisis (2011-2012)

COVID-19 pandemic (2020-2021)

Inflation shock partly linked to the Russian invasion of Ukraine (2022-present)

These sequential crises have exacerbated Italy’s existing economic weaknesses.

Current Situation

As of 2024, Italy continues to grapple with several economic issues:

Slow GDP growth (Bank of Italy estimates 0.6% growth for 2024)

High public debt (projected to rise to 137.5% of GDP by 2027)

Soft labor market (unemployment expected to reach 8.5% by the end of 2024)

Pressure on consumers due to falling employment levels and slowing wage growth

Conclusion

Italy’s economic issues have deep historical roots dating back to the 1970s, they have been significantly amplified by the series of crises over the past 15 years. The country now faces the challenge of implementing structural reforms while managing its high public debt and stimulating economic growth.