Mamma Mia! Has the Financial Crisis Really Made Us Poorer Than the Italians?

It was a hammer blow to British pride so devastating that some have credited the so-called sorpasso - overtaking - with starting the slide that led to Thatcher's removal from power three years later. In 1987 the Italians, perceived stereotypically as chaotic and corrupt, announced proudly they were more prosperous than the British despite eights years of painful, divisive reform imposed by the Tories.

And now guess what? They've done it again. Just as most of us thought the economic crisis could get no worse, La Stampa yesterday declared: "Italy beats England [sic] with the euro."

Such has been the depreciation of the pound, the paper said, that Britain's gross domestic product was now worth less than Italy's. Applying Wednesday's exchange rate to the two countries' output last year, La Stampa calculated that Italy's was 0.7% higher.

And not only that. "For some weeks we have been individually richer on average," the paper said. The standard measure of prosperity is GDP per head, and on that count Italians were also in front, by almost €900 (£855) a year.

However sobering for Britons, the latest arithmetic should have the bittersweet taste of revenge for Italy, a country whose sorpasso was quickly reversed and which, three years ago, was branded "the real sick man of Europe" by the Economist because of its economic languor. Yet Italians yesterday were not so much toasting their achievement as scratching their heads.

Even La Stampa acknowledged "it seems absurd at a time when company warehouses are packed with unsold merchandise and people talk of nothing but trouble ahead". Italy, too, is in recession, and next year its economy is forecast to shrink, though according to most forecasts not by as much as Britain's.

Surprisingly Italy's prime minister, Silvio Berlusconi, did not seize on the news as proof of the wisdom of his government's policies, and Professor Amedeo Panci, whose Real Economy Research Centre is close to the governing coalition, said: "Frankly, I wouldn't go shouting about an economic miracle." It was an "arithmetical, statistical phenomenon," he said.

"The big issue here is purchasing power," said Professor Tito Boeri, who teaches economics at Milan's Bocconi university. The fact that Italians, along with other inhabitants of the eurozone, had been piling into London to do their Christmas shopping proved the fall in the value of sterling had brought about an imbalance that needed to be compensated for to produce truly comparable figures.

"In 2007, when the purchasing power adjustment for the two countries was about the same, Britain was more than 15% richer," said Boeri. "Since inflation in the two countries has been broadly similar since then, I would imagine that in terms of purchasing power parity we're still at much the same point. The difference is still there, I'm afraid. And I'm speaking as an Italian who would like to feel richer."

Sergio Rizzo, co-author of a recently published bestseller on Italy's gradual economic decline, saw no reason to reassess its underlying thesis. "In the last 10 years, and allowing for inflation and purchasing power, Britain's economy grew by almost 55% while for Italy the figure was less than 29%," said Rizzo, who reeled off a list of reasons why Italy has become the eurozone's back marker.

"Organized crime controls a large part of the south of the country and because of that the mezzogiorno [southern Italy] now attracts less than one per cent of all foreign investment," said Rizzo. "The courts are slow, so creditors routinely have to wait for 10 years to get their money back from bankrupt companies, and the phrase 'sue me then' has become a standard response to demands for money owed. Our public administration is inefficient, poorly computerized and wasteful."

Panci nevertheless thought the shock of the "reovertaking" might help focus attention on overlooked strengths in the Italian economy that could enable it to survive the global recession better than the economies of some other countries, including Britain.

"Our banking system, for example, has long been criticized for being insufficiently enterprising and too rigidly regulated. But it has so far coped admirably with the crisis," he said.

Berlusconi noted earlier this month that while Italy had huge public debt (of more than its annual GDP, in fact), its private borrowings were small because of Italians' legendary preference for saving over spending.

"Italy's aggregate debt is lower than that of the US or Great Britain - a positive fact that ought to be better appreciated," he said.

He expressed optimism that his compatriots' qualities of enterprise and industriousness would pull them through the crisis. They were, he said, like "virtuous ants".

UK v Italy

UK

Teacher £30,594 (€32,206)

Doctor: £74,220 (€78,140)

Nurse £23,898 (€25,161)

Train driver £39,448 (€41,525)

Cappuccino £2.30 (€2.42)

Pizza margherita £5.75 (€6.05 )

Big Mac £2.09 (€2.20)

Black Prada handbag £580 (€610)

World Cups 1

Italy

Teacher €30,571

Doctor €55,944

Nurse €23,121

Train driver €28,760

Cappuccino €2.50

Pizza margherita, €9.00

Big Mac €3.40

Black Prada handbag €780

World Cups 4