In crude, and rather simplistic terms, the Asian formula worked so long as those new inputs were directed into areas where the real value added, at the micro level, was sufficient to support real growth at the macro level. Asia was able to generate high savings rates, and to maintain similarly high levels of investment.
The higher borrowing costs borne by Italy’s banks have up to now been transmitted to interest rates on loans to a lesser extent than in the past, thanks to the stronger balance sheets of credit institutions and the rebalancing of their liabilities towards financial instruments that are less vulnerable to changes in market interest rates.