Daniel Gros wonders who has lost Italy. The majority of the population today has a negative opinion of the EU, representing a complete reversal since the start of the euro, when the country viewed the new currency as a welcome corrective to its own economic problems of high inflation (and high interest rates). Populist politicians charge that the rules of the Growth and Stability Pact do not allow them to stimulate demand and employment. But this does not add up to a convincing argument that euro area membership was somehow responsible for Italy’s economic underperformance: Spain, Portugal and Ireland, which also had to reduce their deficits in trying times, are recovering much more strongly than Italy.
Gros argues that root causes of the current crisis are thus domestic; they have little to do with fiscal rules or a lack of risk sharing. Italy’s slow growth since the turn of the century cannot be explained through underperformance in investment, education and indicators of market liberalisation; the only one area in which Italy’s relative performance has deteriorated since 1999-2000, is the quality of the country’s governance. The euro has become a scapegoat: but this scapegoating constitutes an obstacle to deep reforms.