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Vol 1, Issue 02, May 2019
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Italy was experiencing economic turmoil in 2019 due to huge public debt and long-term economic underperformance. Italy was among the worst performing countries in the eurozone, and several austerity measures had been imposed on it by the European Union. The people of Italy were against such measures, and the political party which had ruled the country for several decades lost the elections in 2018 and an anti-establishment coalition formed the government.

To fulfil the election promises like minimum income for the unemployed, tax cuts, etc., the new government came up with a high-spending budget. The announcement had repercussions for the European markets, and the EU opposed the budget fearing an existential threat to itself. Failure to discipline Italy would be seen as the EU’s failure, and further austerity measures would sour the relationship between the EU and Italy.

The European Commission rejected the draft budget, asking Italy to reconsider the plans, and Italy agreed to reduce the deficit target. But this failed to find a long-term solution to the problem the country was facing. Going forward, it remained to be seen whether the populist government could maintain a proper balance between ensuring the growth of Italy’s economy and restoring the confidence of the eurozone member states.


What is an expansionary fiscal plan? What were the repercussions of the plan for Italy’s economy?
Do you think Italy’s new populist government is responsible for the country’s crisis? If so, how bad would it be?
How can countries with high debt determine their fiscal policies? Is Italy’s fiscal expansion policy helping it in expanding its output?

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