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Italy, the European Union's third-largest economy, is seen by many as an economic underachiever, with sluggish growth and a heavily indebted government. Italy's GDP has barely grown since the creation of the euro, and it was once labelled the "sick man of the euro zone".

However, the Italian economy has bucked the trend since 2019 in the face of a number of headwinds, with real GDP growth outpacing that of Germany, France and Spain since the fourth quarter of 2021.

What accounts for Italy's unexpected economic rebirth? I'm afraid we can't do without these three tips.

Construction provides a major source of economic growth

Italy's first trick to overtaking the economy was construction.

The last two years have seen "record growth" in investment in construction: 20 per cent in 2021 and 12 per cent in 2022. The Italian Builders' association estimates that construction accounts for about a third of Italy's GDP growth. This is because Italy is "special" compared with other major European countries.

What makes Italy "special"? On the one hand, Italy is the most active country in gay infrastructure construction among major European countries. It is Italy's "southern problem" that determines it. Italy is rich in the north and poor in the south, which is the main problem of its economic structure. Therefore, Italy has been hoping to narrow the gap between the north and the south through infrastructure construction for many years.

In May, Italy's Infrastructure and Transport ministry presented a long-term strategy for new infrastructure, with plans to invest 280 billion euros in improved transport infrastructure, 12 billion euros in water infrastructure and 7 billion euros in construction. In a heavily indebted economy, public investment on this scale is a huge undertaking.

On the other hand, Italy is rich in tourism resources, which directly contributes to the Italian people's habit of buying a house -- not only for personal use, but also for rent. According to the Italian tax office, 77.4% of Italian households own real estate, a much higher proportion than in Switzerland and Germany.

Whether it is public investment, tourism or real estate development, it is inseparable from the construction industry. The UBS report also points out that among sectors, Italy's construction sector has enjoyed the strongest advantage: gross value added from the construction sector has contributed 1.1 percentage points to overall growth since the fourth quarter of 2019, compared with between 0.2 and 0.7 percentage points in Germany, France and Spain.

The biggest beneficiary of EU recovery funds

The second coup for Italy's economic turnaround was a "national recovery and resilience plan" that was put in place in 2021 while Mario Draghi, the former European Central Bank president known as "Super Mario", was still prime minister.

The plan includes six tasks, namely digitization of innovation, green revolution and ecological transformation, sustainable infrastructure, education and research, social inclusion, and health care, as well as 58 reforms and 132 investments.

That is the name the EU likes to hear. Through this program, Italy received a total of 191.5 billion euros in European Union recovery funds. The first and second tranches of about 46 billion euros have arrived this year.

The EU's "recovery fund" is the bloc's biggest ever fiscal spending programme, amounting to €750bn, half in grants and half in low-interest loans. A quarter of that went to Italy, making it the biggest beneficiary of EU recovery funds, which are due to be disbursed until 2026.

Eu money has helped Italy weather the impact of the pandemic. The money is, of course, conditional on Italy delivering on some promised economic reforms. What if Italy can't deliver? Italy is in debt, but the EU cannot afford to lose an important member.

His position on the conflict with Ukraine is restrained

The third trick to Italy's economic turnaround is to be less aggressive than other major European countries in dealing with this new geopolitical variable: the Russia-Ukraine conflict.

Under the Draghi administration, Italy put forward a four-point proposal for a peaceful settlement, rather than taking sides easily. The leader of Italy's main Five Star Movement, Giuseppe Conte, has even said Russia is not entirely to blame for the conflict. Former Prime Minister Silvio Berlusconi, with whom Meloni's government, considered far right, came to power, has made no secret of his friendship with Moscow.

Italy's relatively restrained stance on the conflict with Ukraine has not gone unrewarded. Gas shipments from Russia to Italy resumed in early December. That would at least improve business expectations of the energy crisis.

Of course, the Italian economy has unexpectedly healed over the past three years, but this trend is unlikely to last. In its latest outlook report in December, the Italian statistics office estimated GDP growth of 3.9% this year, slowing to 0.4% next year.

In addition, Italy's sovereign debt problem remains a mountain, despite receiving a large "gift" from the European Union's recovery fund -- Italy's public debt will stand at 145.4% of GDP in 2022, according to the government. That would tie the hands of Italy's fiscal policy.

Although Italy's economic turnaround may be short-lived, it shows a number of things. For example, European countries like Italy can still gain from following an emerging economy-like growth path. Another reason why Italy's foreign relations differ from those of many other fractious EU countries is not so much its domestic decisions about government changes as its fiscal position.