The Financial Consequences of Export-led Growth in Germany and Italy

This paper explains the extent to which the export-led growth strategies deployed in Germany and Italy turn out to be self-defeating. The problem lies in the impact of those strategies on the banking systems of the two countries. The German banks become more international; the Italian banks become more locally oriented. In turn, these changes create tensions that cannot be reconciled easily within the institutional framework that made the export-led growth model successful in the first place. The paper also seeks to explain why tensions in export-led growth models today do not always resemble those it experienced in the past - and it examines what are the implications both for how the two countries responded to the economic and financial crisis and how they are responding to the economic consequences of the novel coronavirus pandemic.