Olivier Richard

Isn’t this chart quite telling? The euro locked Italy out of its traditional competitiveness valve, and industry paid the price. For decades, Italy restored its manufacturing and export edge the old way, when inflation raised unit labor costs relative to Germany and others, it devalued the lira. The euro removed that option permanently. After 1999, the only remaining path was higher productivity through better processes, technology, skills, or scale. Many firms, especially smaller ones in traditional manufacturing, never made that leap. Italian and German industrial production tracked closely through the 1980s–90s. After the single currency, Germany’s index kept climbing, at least until unwise left-green policies destroyed German industries, while Italy’s peaked in the early 2000s, then slid and has stayed well below its 2000 level. Relative unit labor costs rose sharply, making Italy markedly more expensive than its eurozone peers without exchange-rate adjustment. Firms that could not raise productivity fast enough lost markets, cut capacity, or closed. The result was lower industrial output and persistently high structural unemployment. Youth joblessness spiked above 40% in the mid-2010s and remains around 20%. For those still employed, real wages stagnated for decades. The euro wasn’t the sole cause, Italy entered with structural productivity, governance, and demographic challenges, but it removed the safety valve that had papered over the gaps. Will politicians ever admit that introducing the euro in Italy was a huge ideologically driven mistake?