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The Italian economy has significant problems — notably feeble productivity growth and a competitiveness handicap, particularly vis a vis Germany. These, writes Martin Wolf in his latest column, are domestic shortcomings. However, Martin argues that Italy’s membership of the eurozone makes them common concerns.

What can be done? In the absence of sustained fiscal transfers between member states of the eurozone, the burden of adjustment will fall on Italy itself. It will have to introduce reforms aimed at promoting productivity growth and making its labour market more flexible.

Given the political volatility that led to the populist Five Star-League governing coalition, it is not obvious that such reforms are in the offing. In their absence, the bet taken by policymakers on Italian membership of the single currency in the 1990s will look worse than ever.

Brooke Masters argues that watering down the US Martin Act on financial fraud is a recipe for trouble.

Roula Khalaf tries to imagine a summit between Donald Trump and Iran’s president Hassan Rouhani, and concludes that conflict is more likely than concord.

George Magnus believes the White House is right to be concerned about Chinese abuses of intellectual property and forced technology transfer. But he concludes that tariffs are not the way to persuade Beijing to play by the rules of international trade.

Courtney Weaver examines how Donald Trump is playing to the sympathies of his most vociferous supporters in the row over the administration’s policy of separating migrant families at the border with Mexico.

What you’ve been saying

Interest rate anxiety may be premature— Letter from Juan Salazar:
With reference to your report “Hawkish Fed lifts rates as Trump tax cuts fuel economic expansion” (June 14): while I only have access to arithmetic, and not to Jay Powell’s data at the Fed, I wonder if interest rates in the US can increase in a meaningful way from where they are. Regarding multiplication, we’ve all agreed that when you multiply even a small number (think 0.5 per cent) by a gigantic one (think level of debt) you still get a very large number (think interest payable). Maybe some are suffering from premature anxiety.

Comment by Nuraghe on China is winning the global tech race:
I have just been to China and hello, I can’t see any possibility for the west competing. They are far ahead of the west in electric cars, fast trains, energy, paying systems, services, you name it. The only exceptions are democracy, clean air and, until 2021 when their Airbus will hit the air, aeroplanes. They don’t only have advantages of scale; they also have advantages of a state system which actually helps innovation instead of burying it in copyrights. The problem for the west is not unfair trade but instead a dysfunctional production system, where the resources go to the finance capital.

ECB mandate claim missed the sweet spot— Letter from Peter Doyle:
Reza Moghadam’s claim that a mandate adjustment for the European Central Bank to include employment and financial stability will “pay for the long-term success of the euro” does not even raise chalk dust (“The ECB’s narrow mandate is no longer fit for purpose”, June 15). And yet the most compelling macroeconomic reason for raising the ECB inflation target with or without other mandate adjustments, namely the sustained drop in global equilibrium real interest rates to zero or thereabouts, is, like Roger Federer at Roland Garros, a no-show. Double fault.

The Big Read

The Big Read: Oil producers face their ‘life or death’ question
Fear of an imminent peak in demand means companies are less likely to invest. So does that make shortages and a price rise inevitable?

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