Italy and the UK
Relative economic size is one of the main topics around here, especially when measured using fluctuating market exchange rates. For example here, or here where I looked at the possibility of Italy overtaking the UK.Well apparently according to George Osborne in the Evening Standard, that day has come (quoting this presumably). And it seems reasonable enough, given my post last December talked of it happening if the pound was worth less than 1.1 euros.
Yet one would be justified in being sceptical that the Italian economy really was larger than the UK economy. A visit to any continental European country (or look at Gap's price tags which show euro and sterling prices) makes you think the pound is probably undervalued against the euro.
In fact Italy's GDP in constant prices and local currency has performed almost identically to the UK's over the last year, so clearly we are talking about currency effects, not anything real going on. I've remarked before that one of the weird things about economic commentary in this recession has been a love of devaluation (Ambrose Evans Pritchard give the impression he believes ever country in the world can and should devalue at the same time). Well here's (one of) the drawbacks.
Labels: economics
posted by Matthew @ 10/26/2009 02:20:00 PM
Comments: 0
