Italy is one of the problem countries of Europe, but it’s different from the others. Unlike Greece, the government deficit is small. If we exclude interest payments there’s a surplus. Unlike Ireland and Spain, the banks are fine. So what’s the problem?
Gian Luca Clementi has the answer in a word: growth. As you can see below, growth — here the 10-year average growth rate of GDP per person — has fallen steadily since 1960 and is now essentially zero. Your assignment: explain why. I’ll try to get Gian Luca to send us his answer.
Update (Oct 18): Stan Zin sends this picture of productivity, which has the same profile.