Charles P Kindleberger, the great economic historian, once noted that the Great Depression was so deep and so long because of "British inability and American unwillingness" to stabilise the system. Among the functions the great powers failed to perform, a few should ring a bell to European leaders today.

Kindleberger singled out their failure to “maintain a market for distress goods” – that is, to keep their domestic markets open to imports from crisis-stricken economies.

Surely history is not repeating itself – at least not in the literal sense. European creditor countries today are not tempted by anything like America's Smoot-Hawley Tariff Act, which crippled world trade in 1930. Germany, the Netherlands, Austria, and Finland remain committed to the EU's single market for goods and services.

Still, one cannot help but notice similarities with the 1930s. At the time of the Great Crash, the US and France were piling up gold as fast as the Weimar Republic was piling up unemployment.

Today's northern European countries are running up record current-account surpluses, just as some southern European countries are experiencing Weimar-level unemployment. For Italy, Europe's fourth-largest economy, the slump is deeper than 80 years ago. Meanwhile, huge savings and potential demand for consumer and capital goods remain locked up next door.

How did this happen? The cumulative current-account surplus of the Scandinavian countries, the Netherlands, Austria, Switzerland and Germany is about $500 billion. This dwarfs China's surplus at its mercantilist peak of the mid-2000s.

More striking, in the now-rebalancing euro zone, many countries' current accounts are trending towards balance (and Ireland has moved from deficit to a small surplus). One exception is Germany, whose external position strengthened last year, with the surplus rising from 6.2 to 7 per cent of gross domestic product.

Distorted view

Indeed, Germany’s GDP grew by just 0.9 per cent last year, and is forecast to slow further this year, to 0.6 per cent. Slackening growth, declining private and public debt, and super-low interest rates would suggest loosening up a bit and supporting aggregate demand. Instead, a distorted view of what competitiveness really is (mis)leads politicians to consider large external surpluses an unqualified good, whatever the consequences abroad.

The second exception is France. Over the last year, France’s external deficit deteriorated further, from 2.4 per cent to 3.5 per cent of GDP. France faces zero or negative growth in 2013, and seems to have reached the point at which it must reverse course on competitiveness.

This, too, is reminiscent of the 1930s. To paraphrase Kindleberger, French inability and German unwillingness to stabilise the system are contributing to an ever more intractable European crisis.

The debate in Brussels on the "right" amount of austerity misses the mark; in the same vein, southern European leaders' strategy of blaming German chancellor Angela Merkel for their own tax increases looks increasingly futile. It is not Germany's fault that Italy and Spain had to tighten their budgets last year. As research by Ray Dalio shows, any country with an average cost of debt far above its nominal GDP growth has little choice but to resort to belt-tightening. Because debt monetisation was no option, austerity had to ensue, regardless of what Merkel had to say.

This suggests a collective failure to frame the response. Southern European leaders have wasted energy asking Merkel for weaker fiscal medicine. Merkel and her allies have invested just as much political capital in resisting such pressure.

Southern countries should accept the need for deeper, competitiveness-enhancing reforms. Germany and its allies should accept that running high external surpluses is damaging the euro zone and themselves, and that it is time to put part of their huge excess savings to work to support growth.

Without a pro-growth, pro-reform deal, southern Europe's attempts at deleveraging may result in a politically destabilising depression. As Mark Twain famously observed, "History doesn't repeat itself. At best, it sometimes rhymes." In Europe's case, the poetry could be very dark.

Federico Fubini is an Italian award-winning author and financial columnist. He is the author of Noi siamo la Rivoluzione (We are the Revolution)