Public Debt and Inflation in Italy’s Political Economy. Then and Now

This contribution analyzes the evolution of public debt and inflation in Italy between the late 1960s and the present. In particular, five distinct phases are identified. The first phase (1969-1979), in which the evolution of public debt and inflation was strongly influenced by international shocks and trade union struggles. This period was characterized by an increase in public debt and inflation. The second (1979-1993) was characterized by a lack of consistency between fiscal and monetary policies. During these years there was a conflict between the government and the Bank of Italy, as the Italian government focused on expanding the public budget and the central bank on reducing inflation. This had a strong impact on the stability of the public accounts. The third phase (1994-2007), marked by the beginning of the process of monetary and fiscal convergence towards the Maastricht parameters. The fourth (2008-2019), which began with two financial crises and ended with deep stagnation and low inflation. During this phase Italy suffered the negative effects of the austerity policies that affected the PIIGS countries. Finally, the phase associated with the pandemic and the Russian-Ukrainian conflict (2020-2023), characterized by high public debt and rising inflation, for which we still do not have a clear picture.