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Italian Economic Trends and Policies

Since the beginning of the 90’s, Italian policymakers have included at the top of their agenda the stabilization and the strengthening of the financial and monetary sector, which had deteriorated during the previous two decades.
The results of this commitment have been remarkable, thus enabling the country to join the European Monetary Union and its common currency, the Euro, since its launch in January 1999.

In 1990, Italy's budget deficit was 11.1 per cent out of its GDP. In 1996, it declined to 7.1 per cent.
The following year, a contractionary fiscal policy led the budget deficit to 2.7 per cent, below the critical 3 per cent threshold set by the Maastricht Treaty criteria to qualify for the participation in the Euro.
In the year 2000 the budget deficit was 1.5 per cent out of the GDP. Since 1991, the primary balance (net of the interests to service the public debt) has shown a growing surplus.

The fight against inflation has achieved equally impressive results: during the period 1997-99 the Consumer Price Index (CPI) never increased by 2 per cent.
In the year 2000, the inflation, as measured by the CPI, was 2.6 per cent.

The successful struggle against inflation and the lower budget deficits along with the participation to the European Monetary Union, determined a substantial decrease of long-term interest rates, whose levels are now in line with those prevailing in the rest of Europe.

During the last decade, Italy has been able to realign the imbalances that had developed in its external financial position. The current account has been in surplus since 1993.
As a result, the net foreign debt of Italy, which was 10.8 per cent of GDP in 1992, has since fallen constantly, finally turning into a net credit in 1999.

The macroeconomic adjustment policies of the nineties levied their short-term toll on the productive sector dynamism and on the GDP growth.
Moreover, the recent Asian crisis had further growth-dampening effects on the Italian economy during the 1998-99 period. However, in 2000, the economy returned to grow at a faster pace along with the rest of Europe.

Recent economic developments spilled over in the labor market, where the unemployment rate in 2000 fell by 0.8 percentage points to 10.6 per cent from 11.4 per cent of the previous year.

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