Italy's Economy
Italy and the Euro
How joining the euro in 1999 removed Italy's ability to devalue the lira, and the debate over whether the euro contributed to Italy's stagnation.
Italy joined the euro in 1999.
Before
Italy often devalued the lira to regain competitiveness.
After
- No more devaluation.
- Lower interest rates at first.
Competitiveness
Italian wages and costs rose faster than productivity, while Germany restrained costs; Italy lost export competitiveness.
Debate
- Some blame the euro for stagnation.
- Others say Italy’s problems (productivity, bureaucracy) predate the euro.
Euroscepticism
Some parties proposed leaving the euro, but none acted on it.
The lost devaluation
In the 1990s, a lira devaluation helped exporters; in the euro, that option disappeared.
Thinking the euro alone caused stagnation
Productivity problems predate it.
Key takeaways
- Italy joined the euro in 1999.
- It could no longer devalue.
- Competitiveness fell against Germany.
- Deeper problems predate the euro.
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