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According to economists of neoclassical inspiration, foreign payments imbalances should not cause concern because they lead to a devaluation of the currency which will restore equilibrium in the medium-long run. Recent studies on the effects of devaluation show that this argument is questionable and that redistributive effects tend to depress domestic demand. The growing deficit in foreign payments may therefore be one of the main factors that drove part of the British public to vote to leave the European Union.
An empirical analysis by Brancaccio, Fontana, Lopreite and Realfonzo shows that the ECB is not capable of controlling the nominal income trend and therefore also inflation. The following study is in line with the alternative argument, according to which the real task of the central bank is to regulate the rhythm of insolvencies in the economic system.
In the Mediterranean model, pensions are doubly important: for the person who is entitled and for his family. Systematically weakening them, or not protecting them, means undermining social policies in their entirety. Specifically, the article examines the Italian case, where pensioners have a central function and indirectly take on the role of compensating for the gaps in protection and address the shortcomings of the welfare system.
The crisis is persisting in Europe; deflation, stagnation and the drop in industrial production dominate in various countries: less money to spend, lower consumption, fewer imports. This is the situation in Italy, as analyzed in the article; it has achieved an improvement in current account balances due to a loss of wealth caused by austerity, while a country like Germany continues to show a favorable balance of trade.
The growth of productivity has a positive influence on aggregate demand and, as suggested by the Kaldor-Verdoorn law, growth of demand has a positive effect on productivity. However, this article shows that in cases of stagnant or recessive aggregate demand, to combat the weakening of the economy, the economic literature suggests intervening with expansionary fiscal policies to increase productivity, investment in infrastructure and R&D expenditure.
After examining the birth of the European Union and its end, showing that a single currency without a single state, a monetary policy without a budget policy has never been seen, the article focuses on the corrections that Europe demands of Italy in the case of deviation from the predicted deficit. The constraints of the Pact of Stability are based for instance on the concept of potential GDP, which is highly questionable because the corrections required by Europe depend on a concept of which there is no unanimous, unequivocal interpretation.
The general debate on GDP variations alone does not come to terms with the real problem:Italy must rapidly rethink the economic and industrial policies adopted over the years, leading to questionable outcomes. After a survey of GDP trends compared to other European countries, the article concludes by stating the need for the country to change its economic policies.
Although the central banks of the world’s main economies have implemented expansionary monetary policies to bring down interest rates and therefore stimulate investments, the results have not been up to expectations. Monetary policy has not had the desired effects on the real economy, since the aggregate demand remained weak. The inequalities in income distribution and the ageing of population are related to the secular stagnation.