DOES THERE STILL EXIST AN EXTERNAL CONSTRAINT ON ITALIAN ECONOMIC-GROWTH

The external constraint on Italian economic growth present in the seventies and again between 1980 and 1982 had already eased by the end of the last decade owing to a combination of favourable external factors (the relative terms of trade for raw materials and manufactures) and domestic factors (the qualitative improvement in the mix of goods traded in the industries enjoying a comparative advantage). These factors largely offset the loss of competitiveness for Italian firms caused by the appreciation in the real exchange rate of the lira, but could not stem a severe deterioration in the trade balance at constant prices. The depreciation of the lira since September 1992, accompanied by the efforts to reform the public finances and wage bargaining policies, promises lasting competitiveness gains for Italian industry. This does not eliminate the limitations imposed by Italy's net external debtor position. The depreciation of the lira cannot on its own remove the structural weaknesses of the Italian economy inherited from the past: a fragile distribution and customer service network in foreign markets, chronic backwardness in developing multinational growth strategies and a consequent marginal position in the world of oligopolistic competition, inadequate investment in research to exploit rapidly advancing technology and an overly limited role for foreign firms as creators of employment and technology in the traditional weak areas of Italian industry.