ABSTRACT
This chapter provides an evidence-based pathology of Italy’s long-term recession–which must be regarded as a crisis of the “post-Maastricht Treaty order of Italian capitalism,” as Fazi calls it. In the aftermath of the global financial crisis of 2008, the Italian economy went through years of economic stagnation and decline, suffering three “official” recessions in a row. Italy’s fiscal consolidation saw the growth of Italy’s real per capita public consumption expenditure, which had averaged 3% per year during 1960–1992, slashed to zero during the period 1992–2018. When Italy signed the Maastricht Treaty, its high rates of inflation and unemployment were regarded as major problems. In Italy, the new climate in industrial relations in the 1990s paid off handsomely in terms of a higher profit share. Italy’s chronic demand deficiency is not just slowing down economic growth, but also hurting vital processes of economic diversification and innovation and depressing labour productivity growth.
