Did the Italian public finances converge to European standards after the EMU?

This chapter analyses whether joining the EMU succeeded in making the Italian public deficit levels converge towards the values of the two other main EU countries, Germany and France. By means of a time series analysis, we conclude that the evolution of the determinants of the Italian public deficit-to-GDP ratio after Maastricht is closer to the German and French ones. Upon controlling for all the other main variables identified in the theoretical literature on debt creation, we reach the conclusion that the Maastricht provisions are the main drivers of this convergence process, which makes the Italian public finances sensitive to the evolution of the Stability and Growth Pact.