The Italian elections led to success for the eurosceptic political parties and the lack of support provided to Italy by the other European countries in the refugee crisis definitely played a major role, according to Patrick Artus, Research Analyst at Natixis.
“But as regards the economy, can Italy’s problems be blamed on Europe?”
- As is the case for the other peripheral euro-zone countries, the end of capital mobility between the euro-zone countries led to a contraction in domestic demand;
- But Italy’s key structural problem is underinvestment and, as a result, a stagnation in productivity over the last 20 years, which explains the loss of competitiveness, the decline in profitability, and the market share losses;
- The stagnation of productivity is linked to the weakness of Italian corporate investment; can this be blamed on Europe? Beyond the other causes (banking crisis, too small companies), the sharp increase in the corporate tax burden in the 1990s, which was needed to reduce the fiscal deficit and join the euro, definitely played a role in depressing corporate earnings.”
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