What happens if a large, high-income economy, burdened with high levels of debt and an overvalued, fixed exchange rate, attempts to lower the debt and regain competitiveness? This question is of current relevance, since this is the challenge confronting Italy and Spain. Yet, as a chapter in the International Monetary Fund's latest World Economic Outlook demonstrates, a relevant historical experience exists: that of the UK between the two world wars. This proves that the interaction between attempts at "internal devaluations" and the dynamics of debt are potentially lethal. Moreover, the plight of Italy and Spain is, in many ways, worse than the UK's was. The latter, after all, could go off the gold standard; exit from the eurozone is far harder. Again, the UK had a central bank able and willing to reduce interest rates. The European Central Bank may not be able and willing to do the same for Italy and Spain.

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So how did this commitment to fiscal famine and monetary necrophilia work? Badly. In 1938, real output was hardly above the level of 1918, with growth averaging 0.5 per cent a year. This was not just because of the Depression. Real output in 1928 was also lower than in 1918. Exports were persistently weak and unemployment persistently elevated. High unemployment was the mechanism for driving nominal and real wages down. But wages are never just another price. The aim was to break organised labour. These policies resulted in the general strike of 1926. They spread a bitterness that lasted decades after the second world war.

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Nevertheless, this is an extremely useful study, not least for bringing out the lessons of the UK's interwar experience for the eurozone today. There is a high risk that the combination of tight fiscal policies with stringent monetary conditions will push Italy and Spain into debt traps via the interaction of high interest rates with low growth. At least the UK retained control over monetary conditions: in the end, it went off gold and lowered interest rates. Members of the eurozone do not have those painless options. But fiscal austerity and efforts to lower wages in countries suffering from monetary strangulation could break societies, governments and even states. Without greater solidarity, the story is unlikely to end well.