The structural problems of a currency area where one country has much lower potential growth than the other countries

In the euro zone, Italy has much lower potential growth than Germany, Spain, France and the euro zone as a whole. As Italy has low long-term growth, its tax revenues are low as well, and the result is a greater increase in public debt than in other countries, also due to low nominal GDP growth. As a result of its low potential growth and high public debt, Italy has to pay a much higher sovereign risk premium than other countries, and therefore has much higher long-term interest rates than the other countries. And lastly, as a result of the combination of lower growth and higher interest rates, Italy has a significantly higher risk of debt crises than other countries. This example shows that in a currency area, a condition of stability and absence of crisis is that the member countries have similar long-term growth rates.