But equally, Italy lost the option of periodic devaluations to bring its costs into line with its trading partners. Those costs went on rising, Italy became less competitive, growth slowed and this year stopped altogether.The result: calls to bring back the lira “as a temporary measure” by the Northern League. That is not going to happen in the short term because it would immediately lead to a devaluation – there is no point in leaving the eurozone unless it does devalue. But were any country to do this, that would undermine the whole concept.

“I’m just going to ignore him” – or words to that effect.It is comic opera in a fine tradition but what no one can really ignore is what happens to the Italian economy That story can be swiftly told. When Italy dumped the lira and adopted the euro, there was an immediate boost to the nation’s finances from lower interest rates. He stayed, and is now in Washington for the IMF/World Bank meetings. In disgust, the finance minister Domenico Siniscalco duly resigned.His successor, Guilio Tremonti, also going to Washington, was asked how he would cope with his fellow member of the Italian delegation. It was not, as is often portrayed by people who should know better, a rich nation’s club that tried to impose neo-colonialist market policies on less developed countries. It was designed to stop excessive market movements disrupting world trade and payments.

It may not be the ideal forum for brokering mutually supporting economic policies, but it looks our best bet because it embraces the BRICs as well as the G7. Otherwise the markets will take charge, as they are doing with the oil price.The tragi-comic opera of Italy and the talent going to wasteA tangled tale in Italy, where they have managed not to lose the central bank governor but a finance minister instead. Antonio Fazio was unfazed by the request from Silvio Berlusconi to resign following criticism that he had favoured a local bank in a cross-border takeover. But the shift overall continues and the G7 countries need to figure out ways to bring the newcomers into the tent.Actually, that is exactly what the IMF was intended to do.

Higher energy prices shift the balance of power within the BRIC; Russia benefits, while the others suffer. Goldman Sachs has revisited some of its earlier work on the relative size of the “BRICs” versus the G7 economies. Brazil, Russia, India and China are collectively narrowing the gap between themselves and the leading industrialised nations, particularly if you do the calculations in purchasing power parity terms (see right-hand graph). Had the main consuming countries set to work earlier, then the rise in energy prices would have been more gradual. The markets will adjust supply and demand but they can do so in a brutal way.That leads to the further point that power is no longer so exclusively in the hands of the G7.