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2018-06-01

Italy - the eurozone’s third-largest economy - is weak and shackled to a monetary union whose impact is substantially malign. Plender

 The rise of the populist politics represented by the anti-establishment Five Star Movement and the far-right League is an all-too-comprehensible consequence of gross economic mismanagement both within Italy and in a very imperfect monetary union.

Within the monetary union, Italy cannot address this competitiveness issue through devaluation. 

The only remedy is internal devaluation via wage deflation.

Yet despite unemployment of 11 per cent and youth unemployment at a devastating 35 per cent, unit labour costs have not come anywhere near to delivering that internal devaluation.

In reality, the level of unemployment that would be required to restore competitiveness might well be unthinkable.





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