ABSTRACT
Over the last twenty-five years, Italy has faced economic and social changes that have been significant in the aftermath of the Global Financial Crisis of 2008. The advent of the Euro led to an increase in the general price level that was negatively perceived by most of the population. The official unemployment rate varied from 11% in 2000 to 6% in 2007, from 13% in 2015 to 11% in 2018. Youth unemployment increased from 20% in 2007 to more than 40% in 2014. Despite a net trade surplus since 2012, the GDP has been growing relatively slowly. Also, public and sovereign debts appear to be worrisome. Public debt has increased, for instance, from 104% in 2007 to 135% in 2019. Moreover, poverty has increased sharply between 1995 and 2020: as of 2019, 4.6 million individuals were at risk of poverty. These economic and social changes have gone hand in hand with three institutional phases and the relative changes in the Italian economic growth model, which can be defined as debt led. Namely, the time of the moderate coalition of Forza Italia and Lega Nord in the 1990s-early 2000s; the technocrat, pro-austerity government of the crisis’ years, whose Pension Reform and Job Act Law have been much unpopular (deregulation); and the nationalist coalition of Lega and Cinque Stelle. The goal of this chapter is to show the fallacy of the debt-led growth model of Italy over the last twenty-five years. First, the real economy has not benefitted from the debt increase as one could have expected. Second, the sovereign debt appears to have increased beyond any justifiable reason. Indeed, the sovereign debt of Italy is higher than the justifiable indebtedness of Italy’s residents. The explanation of this seems to be sought in the unaccomplished architecture of the international monetary system.
