The aim of the paper is to compare the growth and external performances of Germany and Italy in the 1999-2009 ten-year period, i.e., from the advent of European Monetary Union (EMU) up to the financial crisis. Although both economies have been dubbed export-driven growth models in the past, the trajectories of the two countries have diverged in terms of both trade flows and trade balances over the past decade. In Germany, the positive contribution of net exports to GDP growth was the main driver of its higher growth dynamics compared to Italy. Given that traditional cost-competitiveness can only partly account for these divergent external performances, the paper considers two additional factors. First, the increasing tendency of German firms to fragment production internationally, notably in neighbouring Central and Eastern European countries, and, second, the vital role played by the single euro currency and European Monetary Union. The econometric analyses conducted underscore the significance of both those factors in spurring Germany’s trade surplus above that of Italy. In terms of industrial and economic policy, the results of the analysis suggest that the German growth model can be used as an EU benchmark solely in terms of supply side adjustments, given that the high dependency on a current account surplus that well exceeds that of the Euro area prevents it from being extended to the other eurozone countries.
