And it seems to me, ET is a good place to look for people with some theories of an answer:
Economics and Politics by Paul Krugman - The Conscience of a Liberal - NYTimes.com
Italy is often grouped with Greece, Spain, etc. in discussions of the euro crisis. Yet its story is quite different. There were no massive capital inflows; debt is high, but deficits aren't. The most striking thing about Italy is a remarkably dismal productivity performance since the mid to late 1990s. Here's a comparison of Italian with French productivity, as measured by output per worjer, from the Total Economy Database:
I've been reading many attempts to explain what happened; while there's a lot of interesting stuff about everything from regulation to firm size to export mix, I really don't see anything that feels like a slam dunk.
And no, it's not just a too-big welfare state -- France's welfare state is even bigger.
I'm not going to answer this; truly, I don't know. But it's important.
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