How has Italy been able to fund a national debt of 120 per cent of GDP for so long?
That is, when we British fret about a debt that will peak at about 75 per cent of national income? The short answer is Italians, and Italian banks.
Unlike their fecund and free-spending ancestors, today's Italians rather resemble the Japanese: a fearful, ageing population of baby boomers with few bambinos and saving crazily for retirement.
Their savings are channelled through the partly state-owned Italian banking system straight into Italian government bonds.
Thus, unlike the British, a comfortable proportion of Italy's debt is funded domestically, even patriotically. Her well-controlled annual budget deficit – proportionately only about half the UK's – also reassured investors. And while Silvio Berlusconi's character flaws are well publicised, the sober work done by his highly regarded finance minister, Giulio Tremonti, bolstered faith in Italy.
However, everyone knows that Italy is on the slow train to ruin. Her public finances have been reasonably well run, but the economic fundamentals are skewed against her. Her poor demographic mean fewer workers – and thus taxpayers and savers – to fund the health and social costs of a greying populous. And, like Portugal and Greece, she is fundamentally uncompetitive, unable to match German levels of productivity and exports.
Il miracolo economico of the 1960s – symbolised by millions of little Fiat 500s pouring out of bustling Turin – was possible because a vast reservoir of underemployed agricultural workers could be lured into the cities. That cannot be repeated.
There is no longer a lira to devalue. Today's popular retro-styled Fiat 500 – a common sight in Britain – is another great Fiat export success story: It is made in Tychy, Poland.