The Political Economy of Italy in the Euro: Between Credibility and Competitiveness

284 Pages·2017·4.879 MB·English

by  Leila Simona Talani (auth.)

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LeilaSimonaTalani
The Political
Economy of Italy
in the Euro
Between Credibility and Competitiveness
LeilaSimonaTalani
DepartmentofEuropean
andInternationalStudies
King’sCollegeLondon
London,UnitedKingdom
InternationalPoliticalEconomySeries
ISBN978-1-137-57754-2 ISBN978-1-137-57755-9(eBook)
DOI10.1057/978-1-137-57755-9
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C
ONTENTS
1 Introduction:BetweenCredibility andCompetitiveness 1
Background andResearch Question 1
The Theoretical Rationale 2
The Contents 5
References 8
2 Exchange RateAgreements: ASocio-economic
Understandingof Credibility 11
Introduction: Exchange Rate Arrangementsas Foreign
Economic Policy Agreements 11
The Credibilityof Exchange Rate Regimesin IPE 14
A Structural Understanding ofCivil Society andPower 18
The EMUas aNewConstitutionalistProject 23
A Structural Approach to theItalian Positionin the EMU 27
Mapping Socio-economic Interest Groups andCoalitions
in Italy 34
Conclusion 35
Notes 36
References 37
v
vi CONTENTS
PartI The PoliticalEconomy of the Euro andof theCrisis
of the Eurozone
3 CompetitivenessandEMU: The ThreePhasesof the Quest
forCompetitiveness 45
Introduction 45
Competitiveness: A Challengefor EMUfrom theStart 46
The Political EconomyofCompetitiveness 53
TheFirstStageoftheQuestforCompetitiveness:Competitive
Devaluationof theEuro 55
The SecondPhaseofthe Quest forCompetitiveness:
Structural Reforms 61
TheThirdandFailedPhaseintheQuestofCompetitiveness:
The Establishmentof aEuropean Social Dialogue 63
Conclusion 68
Notes 69
References 72
4 TheCrisis of the Eurozone asaCrisis of Competitiveness 77
Introduction 77
The Unfoldingof theCrisis 78
The FiscalRationaleof theEurozone Crisis 80
The GlobalFinancial Crisisand AsymmetricShocks 82
The Eurozone CrisisasaCrisis ofCompetitiveness 86
Germany and theProblem, for theOthers, of the‘n –1’ Country 91
The Reactionof EU Institutionsto the Crisis:Between Austerity
and the ECBasaSaver ofLastResort 100
Conclusion 107
Notes 108
References 111
PartII ThePolitical Economy of Italyin the Euro
5 ConsensusandCredibility: Italyand the Process
ofEuropean MonetaryIntegration:A Closer Lookat the
ERMof the EMS 117
Introduction 117
CONTENTS vii
Macroeconomic Imbalancesat theStart of MonetaryIntegration 118
Labour MarketFlexibility andFiscal Restraint attheTime
of Entryin the ERM 121
Socio-economic Interestsand the Credibilityof theItalian
Commitmentto the ERM 129
The IndustrialSector 131
The PublicSector 133
The BankingSector 134
The TradeUnions 136
Conclusion 137
Notes 138
References 144
6 Italyandthe Quest for Competitiveness:From the Crisis
ofthe ERM toEntry in theEMU 149
The Impactof theERM onItaly’s IndustrialSector: TheLoss
of Competitiveness asSeen byConfindustria 151
Italian Socio-economic Groups ChangingPreferences onthe Eve
of theERM Crisis 157
Regaining Competitiveness: TheImpact ofthe Devaluation
on theItalian Economy 167
At the RootsofItalian MonetaryCredibility: A Widespread
Socio-economic Consensus to EMU 172
Conclusion 182
Notes 182
References 185
7 Italyandthe Lossof Credibility: The Crisis
ofthe Eurozone 189
Introduction 189
Italy under attack 189
Internal Devaluationand Structural Imbalancesin theEMU 193
Labour MarketFlexibility ItalianStyle 195
The EMSas aLaborMarketStraightjacket 200
EMU, JobMarketRestructuring andthe ‘JobsAct’ 203
Conclusion 212
Notes 213
References 217
viii CONTENTS
8 Italyandthe Lossof Competitiveness:Between
the UndergroundEconomy andMigration 223
Quantifyingthe Underground Economyin Italy 224
Italy and Migration:Recent Dynamics 234
The Relation BetweenIrregular Migration
and the Underground Economyand ItsImplications
for theReceiving Societies 239
Conclusion 255
Notes 257
References 258
Conclusion: Italyand theEuro: WhatWent Wrong? 261
Index 269
L F
IST OF IGURES
Fig.3.1 HICPinEuroarea(%changes)1998–1999 47
Fig.3.2 Unemploymentrates1970–2000 47
Fig.3.3 EuroareaGDP%changes1998–1999 48
Fig.3.4 GDP%changesinItaly1986–1992 49
Fig.3.5 GDP,internaldemandandnetexports%changesinItaly,
1990–1992 49
Fig.3.6 RealGDP%changes,1999–2004 57
Fig.3.7 Outputgaps 57
Fig.3.8 M3,HICPandECBmainrefinancingrate%changes,
1999–2003 58
Fig.3.9 US$/euroexchangerates,1999–2004 60
Fig.4.1 Generalgovernmentconsolidatedgrossdebt,1999–2010 82
Fig.4.2 RealGDPloss,2007–2010 83
Fig.4.3 Harmonisedinflationrates%changes:PIIGSandGermany 85
Fig.4.4 Balanceoncurrentaccounttransactionswiththerestofthe
world:PIIGSandGermany,1999–2010 87
Fig.4.5 Netexportsofgoodsandservicesatcurrentprices:PIIGS
andGermany,1999–2010 88
Fig.4.6 Adjustedwageshare:totaleconomyasa%ofGDP,
1999–2017 90
Fig.4.7 Italy:NULCbreakdown2010=100 91
Fig.4.8 Germany:NULCbreakdown2010=100 92
Fig.4.9 Portugal:NULCbreakdown2010=100 93
Fig.4.10 Spain:NULCbreakdown2010=100 94
Fig.4.11 Greece:NULCbreakdown2010=100 94
Fig.4.12 Ireland:NULCbreakdown2010=100 95
Fig.4.13 PIIGSrealexchangerates:2000–2012 97
ix