The problems of the euro have (at least for a day or two) faded from the headlines, but this piece (paid subscription) on Italy from Tuesday’s Financial Times is a reminder—albeit with no direct reference to the way that effect is linked to (unmentioned) cause—of how just how damaging Italy’s inability to devalue its currency against that of its Eurozone competitors has been. Here are the key extracts:

It is one of the glories of Europe that Italy’s economic model survives its catastrophic politics. Government after ineffectual government comes and goes, yet Italian companies successfully navigate an enormous public debt, lack of structural reforms, the erosion of their competitive advantages, and intense export competition to keep the country in the Group of Seven. The model’s success, however, is largely an illusion: Italian real gross domestic product grew 10 percentage points less than the eurozone average in the past decade, according to Capital Economics…Investors should be worried, although not by the 120 per cent ratio of government debt to GDP. That is well managed, and mitigated by modest levels of private sector and household debt. Italy’s problems are in the real economy. UniCredit calculates that, relative to Germany, its competitiveness in unit labour costs has deteriorated 26 per cent since 1999. In that period, eurozone productivity rose 7 per cent – and fell 6 per cent in Italy…

One size does not fit all.