To restore Italy’s situation, a return of capital mobility in the euro zone would be preferable to a fiscal deficit in Italy

Given its nature, the expansionary fiscal policy implemented by the Italian government will not improve the Italian economy’s structural situation. Italy is suffering from cor porate under-investment, stagnant productivity and deteriorating cost competitiveness. The stagnation of productivity and the low level of corporate investment in Italy show that companies’ marginal productivity of capital is high: it is efficient to invest in Italy. This shows that if capital mobility between euro-zone countries reappeared, capital would spontaneously flow to Italy. These capital flows would be far more effective than Italy’s fiscal deficit, which mainly stimulates household demand, while Italy’s problem is a supply problem.