Italy Is Creating Jobs. So Why Is the Economy Barely Growing?
Europe’s GDP Surprise Exposes Italy’s Real Problem: More Employment, Too Little Productivity and Too Little Growth
There is a comforting way to read Europe’s latest economic numbers.
And then there is the uncomfortable one.
Eurostat has just revised second-quarter 2026 growth significantly upward. Between April and June, real GDP increased by 0.6% quarter-on-quarter in the euro area and 0.7% across the European Union.
Only a few weeks earlier, the estimates had been 0.4% and 0.5%.
On an annual basis, GDP was 1.2% higher in the euro area and 1.4% higher across the EU.
That sounds encouraging.
But look at Italy.
Italian GDP grew only:
0.2% quarter-on-quarter
and
1.0% year-on-year.
At the same time, Italian employment continued to increase.
This produces one of the most important — and least politically convenient — questions about the Italian economy:
If Italy keeps creating jobs, why does the economy remain so weak?
The answer takes us directly into the structural problem Italy has avoided for decades.
Employment is growing. Productivity is not growing enough. Real wages remain depressed. And adding workers to a low-productivity economy is not the same thing as making that economy richer.
First, Europe Did Better Than Expected
The European figures deserve recognition.
The euro area’s 0.6% quarterly expansion was not trivial.
After GDP had essentially stagnated in the first quarter, the second quarter represented a genuine acceleration.
But even here, the composition matters more than the headline.
Household consumption contributed +0.2 percentage points to quarterly growth.
Government consumption contributed essentially nothing.
Gross fixed capital formation — investment — contributed essentially nothing in the euro area and just +0.1 percentage points in the EU.