News from 2014-05-26 / KfW Research
Italy is different: Beyond labour market reforms
The German debate about Southern European economies suffers from premature conclusions on the basis of analogies to the German ex-perience of the 2000s. However, the causes of Italy’s weak growth differ from both Germany’s troubles and other peripheral economies’ problems. The main break on faster economic growth in Italy is in deficiencies of the public sector. Moreover, important factors in the crisis are systemic effects stemming from membership in the Eurozone. In particular, Italy suffers from a credit crunch caused and magnified by adverse feedback loops in a currency union.
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