The real difference between France and Italy (ignored by the WSJ)

Very quickly.

A recent article by Richard Barley on the WSJ makes a breaking discovery: Italy is declining!

How (not) surprising!

I will get back to this article later, because it gives us a clear picture of the (catastrophic) state of the art in the international debate.

Here, I will comment only on one detail Barley seems to ignore. True, Italy's performance has been disappointing before and during the crisis, and there are many reasons for that. One of these reasons stands out clearly if you compare Italy with France. As we all know in this blog, the zero-average growth of Italy is also the result of a deliberate policy of domestic demand destruction, carried out during the crisis in order to bring Italy's foreign accounts into balance, as confessed by its author (Monti). Despite the appearence, France's situation is not any better, as I set out as early as 2012 (before the Economist, and when Krugman was so thrilled by the push Hollande was to give to the European economy!).


In fact, once you look at the data you realize immediately that France has simply traded some more growth for a larger current account deficit. This is the result of its political power allowing it not to surrender to its foreign creditors, as Italy did.

Here the data, for your reference:

Before the crisis, France and Italy external indebtedness went hand-in-hand. The pattern is identical, the only difference being that the upper turning point - at about 3% of GDP - in France occurs three years later than in Italy (in 1999 rather than 1996).

During the crisis, Italy could have grown faster if properly stimulated by "non-austerian" policies. However, had it chosen this option, today it would not be reimbursing its external debt (which was the reason why Monti was sent to rule our country). This graph shows you what austerity was for. The crucial difference between Italy and France, therefore, is not one of "macroeconomic fundamentals", or of "fiscal space". It is rather a difference in political influence.

After all, France managed to be an Allied country, and we were an Axis country.

Believe me, in insisting on the fact that French fundamentals are at least as bad as the Italian ones (as shown by their equally slipping current account balances throughout the sample), I do not obey to a narrow-minded nationalist pride. I am very worried about France, and I still believe that France, not Italy, is a major threat to Europe political and social cohesion, because we have a puppet (well, actually more than one..), and they have Marine Le Pen.

The unintended (?) consequences of the euro might be much worse than they are currently understood by "international" journalists...


(I will get back to you later, with more details about this wonderful piece on common sense worship...)

(I beg my English speaking readers to correct my English straight in the comments below, rather than by sending me emails: I have no time to re-read myself and I will not be hurt. I am rather satisfied with what I know, and I do not feel the need to conceal what I don't. This will speed up the revision process, by allowing people to check whether one of my many mistakes has already been corrected by other readers, and will give us the opportunity to discuss a much more important thing than structural reforms: English language...)