Thread by @heimbergecon

It's general election day in Italy. I have again seen lots of strange stories and statements on Italy in the international press.

So here's a data-based summary thread that may help in debunking claims about a "profligate, reform-lazy Italy", pulling all of Europe down. 🧵#CAIN

"Italy has been living beyond its means; now Italians finally need to adjust!"

In fact, 🇮🇹 has exported more goods and services than it imported since 2012 - also during the Covid crisis. Italians consume less than they produce - living below their means.

"Italy is just a debt mess at the costs of others in Europe."

In fact, private sector debt is relatively low in Italy compared to other OECD countries, which typically goes unmentioned when people complain about Italy's debt problems.

"The next Italian government will just continue with profligate government spending."

In fact,🇮🇹 ran large and consistent primary budget surpluses before Covid: revenue exceeded spending excl. interest payments. 🇮🇹 has done more fiscal consolidation than 🇩🇪.

"Italy will just continue with profligate government spending for social protection."

Eurostat data show that per capita government spending in Italy on social protection and health is well below the levels in Germany and France. #CAIN

Italy's public-debt-to-GDP ratio remains high, but this is due to the 1980s legacy (when borrowing costs skyrocketed) and the impact of the financial crisis, € crisis and Covid crisis. Italy did more fiscal consolidation than any other country, contributing to slower growth.

"🇮🇹 received much more or very much more money from the EU budget than it payed in [3 out of 4 Germans believe this] - living off others in Europe."

In fact, Italy was a net contributor to the EU budget for decades. And the simple payer-receiver logic falls short (spillovers!).

"Italy is an economic mess, helped out a bit by tourism."

Italy remains the second-largest industrial location in the EU behind Germany - well ahead of France, Spain, Poland etc.

"Italy's industry faces severe competitiveness problems."

There are structural problems for Italian industry, but there are also things that are not mentioned. Industrial production in Italy lost out during 1990s and 2000s, but has performed better than Germany's since 2015.

"What's Italy without tourism?"

The EU's second-largest industrial location, where firms produce and export lots of high-tech goods. Italy plays an important role in European industry networks.

"The increase in 🇮🇹borrowing costs reflects weak fundamentals."

In fact, history shows that moves in interest rates on 🇮🇹government debt go beyond fundamentals and reflect self-fulfilling market sentiment against which only ECB action (a crisis backstop) is effective.

"🇮🇹 fails to do structural reforms to calm investors."

This ignores labour market flexibilisation since the early 1990s with contested macro effects. Furthermore, 🇮🇹has committed to "structural reforms" with Next Gen EU, which the next government will continue to pursue.

"Italy must finally liberalise its economy."

🇮🇹 has carried out many market-liberal reforms. Labour market flexibilisation brought a sharp increase in fixed-term contracts and a decline in real wages. However, this type of structural reforms has not boosted productivity growth.

"Italy's labour market is sclerotic."

Labour market liberalisation generated temporary jobs. However, cheap labour reduced real wages and diminished incentives for companies to make labour-saving investments – with negative productivity effects, the basis for long-term growth.

"Italy needs to improve price competitiveness".

The dark side of the policy mix to reduce labour costs in 🇮🇹is that real wages have declined strongly vis-a-vis 🇩🇪🇫🇷 while temporary employment has increased. This has weakened domestic demand, contributing to weak growth.

"🇮🇹 households are wealthier than their 🇩🇪 peers anyway."

No. The median Italian household holds more net wealth than the comparable German or Austrian household (more private-property ownership!). But the average household is clearly wealthier in Germany and Austria #CAIN

Let's stop these one-sided stories about a more or less completely run-down 🇮🇹, incapable of doing "structural reforms", artificially kept alive by ECB and EU. Let's improve the intellectual quality of our economic policy debates - also in facing any new government.