A strong euro and a crowded piazza: Italy's growth paradox

France 24 reported this week that Rome is testing a new night-time tourism strategy, opening museums, archaeological sites, parks and historic residences after dark to ease the pressure of summer crowds and punishing heat on the city's most visited monuments. The initiative is a practical response to a structural problem: Italy's tourism economy has become so large, and so concentrated in a handful of iconic locations, that it is beginning to damage the very assets it depends on.

The timing is telling. Italy's GDP expanded by just 0.54 percent in 2025, according to World Bank data — a rate that, in a year of relative global calm, points to an economy generating little momentum of its own. Tourism receipts are among the few sectors reliably pulling in the other direction, which is precisely why Rome's experiment matters beyond the culture pages: when growth is thin, the management of visitor flows becomes an economic question, not merely a logistical one.

Inflation, at 1.53 percent in 2025, is now comfortably below the ECB's two-percent target. For households, that is welcome relief after the price spikes of earlier years. For the government, it narrows the risk of a wage-price spiral but also reduces the nominal GDP growth that helps erode the debt burden over time. A low-inflation, low-growth combination is fiscally neutral at best.

The labour market offers the most unambiguous piece of good news in the data. Unemployment stood at 6.39 percent in 2025 — a figure that, by Italy's own historical standards, represents a meaningful improvement, even if it remains above the eurozone average. Whether that reflects genuine job creation or continued emigration of working-age Italians — a trend well documented by foreign demographers — is a question the headline rate does not answer.

On currency markets, the euro has strengthened steadily against the dollar over the past month, moving from 1.1392 on 23 July to 1.1699 on 21 August. Against the pound it stands at 0.8567, and against the yen at 185.66. A stronger euro reduces the cost of energy and commodity imports, which bears on inflation, but it also makes Italian exports — from machinery to fashion — more expensive for buyers outside the eurozone. For an economy where export competitiveness is a perennial concern, the direction of travel deserves watching.

The night-tourism experiment in Rome illustrates a broader strategic tension. Italy's soft-power industries — culture, food, design, landscape — generate foreign exchange and employment, but they are also subject to congestion effects that no interest rate can fix. The Guardian reported separately this week that hundreds of visitors overwhelmed a mountain refuge in the Dolomites, drawn not by the panorama but by a pastry promoted on social media. The episode is trivial in isolation; as a pattern, it describes an economy increasingly dependent on viral attention rather than productive investment.

The New York Times noted this week that the Italian government is approaching what would be the longest-lasting administration in the country's postwar history. Political stability is a precondition for the structural reforms — in the labour market, in the courts, in public administration — that international institutions have long argued Italy needs to lift its underlying growth rate. Whether durability translates into reform, or merely into the consolidation of existing arrangements, is the question foreign investors and the ECB will be watching as the autumn budget season approaches.