Italy’s austerity-fueled crisis is a warning to the Eurozone

The income gap between Italy and France is now (as of 2018) 18 percentage points, which is more than what it was in 1960; Italian GDP per capita is 76% of per capita GDP in the Euro-4 economies. Italy kept closer to the rules than France and Germany and paid heavily for this: The permanent fiscal consolidation, the persistent wage restraint and the overvalued exchange rate killed Italian aggregate demand—and the demand shortage asphyxiated the growth of output, productivity, jobs and incomes. Within the E.U., Italy’s turnaround was remarkable: From 1992 through 2008, the growth of Italian real wages per worker (0.35% per year) was only half the real wage growth in the Euro-4 (0.7% per annum) and it was even lower compared to real wage growth in France (0.9% per year).

Source: www.ineteconomics.org