In the final decade of 20Century the evolution of the Italian economy, and the policies implemented to guide its development, have been directed, albeit with bumpy paths, to the rebalancing and rehabilitation of the imbalances inherited from the previous two decades. The 1990s began with a slowdown in economic growth, a bent but not eradicated inflation, a growing imbalance in external accounts and, above all, a rise in public debt at levels and at such pace as to make question the sustainability of the public sector’s financial position. Over all this loomed the maturation of the crisis of the political system, which had been forming after the end of the Second World War. At the beginning of the decade the Italy, just as he signed in Maastricht (1992) a solemn commitment to convergence towards more virtuous financial conditions, in view of the completion of the European Economic and Monetary Union, was hit by a very serious currency crisis, which resulted in an economic and political regime crisis. Since then, the consolidation effort has become more determined and continuous, guided by the commitments of European convergence, and has achieved important results, especially in terms of rebalancing the public budget, reducing inflation and achieving an active external position..
Trends in the Italian economy at the end of the century
According to transporthint, the 1992 currency crisis and the restrictive monetary and fiscal policy measures had triggered a spiral of uncertainty and mistrust among Italian consumers and investors, which resulted in a 5 % contraction in domestic demand in 1993, causing the worst economic recession. since the war: in spite of the substantial progress of exports, the GDP decreased of 0.9 % (tab. 7). The production cycle reached its lowest point in the autumn of 1993. Thanks to the persistent strength of exports, stimulated by the gains in price competitiveness that the devaluation of the lira allowed, as well as by the reinvigoration of the international situation, domestic production resumed growth in the following two years, at rates between 2 and 3 %. Economic activity slowed down again in the three-year period 1996 – 98, recording growth rates around 1%, due to the waning of the competitive advantage on export markets, and above all due to the action of curbing domestic demand exerted by the now unavoidable structural correction policies of the public budget, and by the related effects of compression of current and available income. expected.
Modest, or even negative, development rates could not fail to reflect on employment levels. The unfavorable cyclical phase triggered deep restructuring in individual companies and entire production sectors and, unlike in the past, also in the services sector: the result was a drastic decline in employment, around 4 % between 1992 and 1995 (a approximately one million jobs), partially recovered in the following three years (table 7).
The sharp fall in domestic demand in 1993, together with the declining trends in international commodity prices, helped to prevent the devaluation of the lira from translating into a flare-up of inflation. In a context of recession and ceding employment, the agreement between the government and the social partners on labor costs of July 1993 (see below: Income policy) also played a fundamental role in containing inflation, limiting reactivity of nominal wages to increases in prices caused by the weakness of the lira exchange rate: in the period 1992 – 95 per capita wages in real terms fell at an average annual rate of 3,4 % in the whole economy (tab. 8); they remained unchanged in industry, where, however, productivity was progressing at an average rate of 3.6 %. In nominal terms, the total cost of labor per unit of output in industry increased over the period by just over 1 %, allowing profit margins to reach new all-time highs. Consumer price inflation remained between 4 and 5.5 approximately% between 1992 and 1996 (tab. 7); in 1994 – 95 dangerous upturns, especially after the further fall of the lira on the occasion of the Mexican financial crisis (February-March 1995), were opposed by monetary policy. The growth rate of consumer prices fell below 2 % between 1997 and 1998, in line with the objectives of the central bank and the government. Thus, an inflationary phase lasting almost thirty years for the Italian economy ended.
In the balance of payments current account of the Italy, After the ephemeral and the small surplus in 1986, he immediately reopened a growing deficit, arrived in 1992 to 2, 3 % of GDP, the worst result among those registered that year in the main industrial countries, with the exception of Canada. The succession of large external deficits for almost fifteen years had led the Italy to accumulate a net debt towards the rest of the world almost equal, at the end of 1992, to 11% of GDP. The combination of an expansive budget policy with a monetary and exchange rate policy rigorously aimed at disinflation of the economy had contributed to the imbalance: the growing generosity of the net provisions borne by the public budget had fueled the disposable income of families and, at the same time, at the same time, their propensity to save has been reduced, thus stimulating the inflow from abroad of both consumer and investment goods, and savings, needed to finance internal investments; foreign savings had been attracted by the high nominal yields in the presence of exchange rate stability. The devaluation of the lira and, above all, the abrupt downsizing, followed by stagnation, of domestic demand produced, after 1992, a reversal in the foreign accounts of the Italy of an entity never experienced before. The current account balance became positive and reached in 1997 the 3.6 % of GDP. The net external debt was fully canceled and transformed into a net credit in 1998.