6. Growth and stagnation - Italy & Spain

Question 1

What is the “Walters 1” effect, and which country benefited from it?

Answer 1

Low interest rates boosted credit, construction, and domestic demand. it was spain

Question 2

Why did Italy fail to benefit from Walters 1 or Walters 2?

Answer 2

Tight fiscal policy and lack of reforms held back growth.

Question 3

How did Italy and Spain’s economies differ in the last 30 years?

Answer 3

Spain grew rapidly, while Italy faced long-term stagnation.

Question 4

What happened to productivity in Spain and Italy after 2008?

Answer 4

Spain’s productivity improved, but Italy’s declined further.

Question 5

How did Spain’s credit boom affect its economy?

Answer 5

House prices in Spain tripled, and household debt rose to 149% of income. Italy’s was way smaller

Question 6

How did Spain’s exports perform compared to Italy’s?

Answer 6

Spain’s exports grew 112%, higher than Italy’s 72%, but Spain’s imports caused trade deficits.

Question 7

How did Spain and Italy recover from the 2008 crisis?

Answer 7

Spain recovered faster with domestic demand, while Italy struggled with slow recovery and weak reforms.

Question 8

What impact did the Eurozone have on Italy?

Answer 8

The euro removed the option for currency devaluation, which hurt Italy’s competitiveness.

Question 9

What is a common issue for Italy and Spain?

Answer 9

Both economies rely heavily on domestic demand and face challenges in competitiveness within the EU