The eurozone consists of 20 European Union member states that use the euro as their primary currency under one monetary authority, the Eurosystem. In 2018, Italy, the third-largest economy in the currency bloc, faced a significant political and economic crisis that affected both the EU and global markets.

The crisis began when Italy's ruling coalition, comprising the populist Five Star Movement (M5S) and Lega Nord, submitted a 2019 budget with a 2.4% GDP deficit. This proposal concerned EU partners, as Italy's government debt already stood at 134% of GDP—more than double the eurozone limit.

Political Instability

The root cause stemmed from the inability to form a stable government after the March 2018 elections. Despite M5S and Lega Nord agreeing on Giuseppe Conte as prime minister, his resignation followed President Mattarella's rejection of Paolo Savona, a euro-skeptic, as economy minister. This led to Carlo Cottarelli's appointment as interim prime minister and calls for new elections.

Economic Challenges

Italy's economic struggles included:

• High government debt ($2.5 trillion in 2019)
• Persistent unemployment (though improved from 12.77% in 2014 to 7% in 2024)
• Slow economic growth since the 2008 financial crisis
• Significant problem loans in the banking sector

Recent Improvements

The election of Giorgia Meloni as Italy's first female prime minister in 2022 brought political stability. Her government's achievements include:

• Reducing budget deficit from 7.2% (2023) to 3.4% (2024)
• Decreasing public debt from 146% (2021) to 135% of GDP
• Implementing a $31 billion budget focusing on tax cuts and social benefits
• Strengthening Italy's role in the EU

Current State

While Italy remains Europe's fourth-largest economy, challenges persist:

• Economic growth remains modest at 0.7% (2024)
• Public debt continues to be high at 135% of GDP
• The service sector dominates, accounting for over 70% of GDP
• Tourism and luxury goods remain economic strengths

Despite ongoing challenges, Italy has shown significant improvement since the 2018 crisis, with better political stability and improving economic indicators, though continued reforms are needed for long-term sustainable growth.

Related Articles

Previous Articles