I haven’t seen any explicit studies, but in principle there is no particular problem.

There was a time when people imagined that there was a difference, based on the distiction between the respective tangible and intangible products.

There were all sorts of obscure debates about ‘productive’ and ‘unproductive’ labour, or about ‘necessary’ and ‘luxury’ consumption, but I think these are now pretty much dated.

One produces a physical product, the other doesn’t. The only difference is the time scale over which you consume really, and even this may not hold as you may lease a service over a protracted time scale, and buy an industrial product - like a firework - which you consume instantaneously.

As the debate about BPO shows, you can also import and export services just as you can the products of industrial output.

Obviously, for all sorts of reasons, economies continue to have agricultural and industrial components, but normally these days with pretty residual value shares.

Domestic demand is weak in both countries. Trade between them helps both of them, and this is certainly fine. OTOH while Germany still manages a trade surplus, Italy is slipping into deficit, and for these purposes it doesn’t matter whether the deficit is with other EU countries or with China.

Obviously German consumers can see some advantages in buying in Italy, and Italians obviously buy some things from Germany.

In terms of exports, Italian companies seem to be *less* competitive than German ones. Hence their problem is, in principle, bigger.

I doubt the Morgan Stanley people look at it this way, but is there some point when “domestic demand” ceases being Italian domestic and instead becomes eurozone domestic?

Maybe I only think this way because I see the enormous columns of cars headed down the autobahn to Italy almost every weekend…