There was consternation in Italy recently with The Economist’s characterisation of the British Tory Ominshambles as ‘Br-italy’, because it played into outdated stereotypes. And, with good reason.
Italy has had 68 governments since World War 2, run up massive public debts and regularly resorted to currency devaluation rather than harder-to-do policy reform to maintain competitiveness. Relatively short-lived governments are still the norm, with Giorgia Meloni having recently become the 7th PM in ten years at the head of a Brothers of Italy party that can trace an authentic neo-fascist lineage.
Fiscal profligacy and currency devaluation, however, were very much 20th century phenomena. Italy has been able to respond appropriately with fiscal stimulus to both the global financial crisis and the Covid-19 pandemic, in line with peer countries. But, Eurozone membership has greatly constrained Italian policymakers since the mid-1990s.
Continue reading