The author analyzes the main characteristics of Italy’s economic growth over the period from the post-war “economic miracle” to the current crisis in world economy. He considers the growth impact of both internal and external factors. By using a neoclassical production function, he reveals the contribution of key factors to productivity growth. In order to break down the growth of output into fundamental factors considering the determinant role of technical progress, an endogenous model of world economic development has been applied, whose parameters are in principle fit for any country. All this has proven the author’s hypothesis concerning the statistical significance of the influence of both the internal factors, described by the mechanism of technical progress, and the external, international ones on Italy’s economic growth. The main conclusion of research is that the current economic and financial crisis in Europe can be surmounted with the help of a growth-oriented economic policy based on the intensification of technical progress and, first of all, its creative component, which would insure favorable conditions for improving competitiveness. But this requires the solution of structural problems that have led to increasing disequilibrium in many European economies which is hardly possible without a radical reform of the welfare state.