Introduction to 'Italy and Germany: Incompatible Varieties of Europe?

This article introduces the questions that motivate this special issue: the growing divergence among Eurozone member states and the overall disappointing performance of the Eurozone as a whole. It justifies the choice of Germany and Italy as the two countries that can best exemplify what are considered, respectively, the northern and southern politico-economic models coexisting in the Eurozone and proposes an approach to these questions that deviates from the mainstream. It argues that comparing the performance of Eurozone member economies as if they were independent of one another prevents an accurate assessment of the externalities created by the common currency and claims that microeconomic solutions to macroeconomic problems have the effect of reinforcing the divergence, rather than attenuating it. Incorporating the insights drawn from the detailed analysis of the various aspects of the German and Italian models provided by the contributors to this special issue, it concludes by assessing the likely impact of the impending reform of EMU.