Italy to Return to Libya?

Rome

From my latest dispatch for VOA:

“The beheadings of 21 Coptic Christians by Islamic militants on the Libyan shore of the Mediterranean Sea, a short boat ride from Italy, has shaken Italians and is prompting a fierce debate here in Rome about what Italy can do to quell the anarchy engulfing its former colony.

Italians have watched with growing alarm for months the raging conflict in Libya between competing militias backing rival governments in Tripoli and Tobruk. The main consequence for Italy has been a rising flow of illegal immigrants, mainly from sub-Saharan Africa, attempting to cross the Mediterranean from the coast of Libya in rickety boats.

But now Italy worries that the rapid emergence of a jihadist group loyal to the so-called Islamic State spells new dangers – specifically, that jihadists might gain access to Italy by posing as illegal immigrants. The black-clad, masked executioners in the video posted Sunday on the Internet, which authorities here say is authentic, appeared to take pains to emphasize that Rome is indeed a target.”

Read full report here.

Italy Falls Apart

From war to something else — not as brutal or tragic, of course, but nonetheless saddening. Just before returning to Libya from Italy I wrote for Macleans about how Italy’s ancient monuments are being neglected because of state spending cuts dictated by the austerity budget.

“In March, the poor state of an open-air, Etruscan-era theatre in northern Lazio was highlighted by an investigative television show, Striscia la Notizia. One of the presenters remarked as the camera panned over a riot of weeds: “The ancient Romans would have put on plays here: comedies, tragedies. The tragedy today is the state of this archaeological site.”

You can read the whole piece here.

The Not So Sweet Life

“Far from tourist crowds savouring Italy’s fabled dolce vita, sipping cappuccinos and chilled Prosecco in big-city piazzas, the walled towns and hilltop villages of Tuscia, in central Italy, are seeing the sweet life disappear.” The opening paragraph in my piece in Maclean’s magazine on the austerity-linked souring of Italian life in this decade of eurozone crisis.

Infantile Expansionary Contraction?

Democracy is about elections and we might not always like how people cast their votes but to dismiss their choices as “infantile” strikes me as high-handed — and in the case of the elections recently in Europe mistaken.

In the wake of the elections in four European countries – the UK, France, Italy and Greece — many Conservative commentators have been on their high horse. Of course, on the left their counterparts have been on braying form when some humility may have been in order, after all traditional left parties also bear a fair share of responsibility for the debt disaster that’s struck Europe.

As far as many Conservative commentators are concerned the narrative is this: Europeans displayed an astonishing lack of adult seriousness by either voting for fringe parties as in Italy or Greece or for the traditional left in France and the UK. By voting the way they did they displayed “wishful thinking” and ignored economic realities. Only by backing parties that are supportive of German-dictated austerity would they have shown they were serious.

And the fringe leaders are all lumped together regardless.

Anne Applebaum writing in Slate Magazine, for instance, argues that the fringe parties are “anti-European, anti-globalization, and anti-immigration. Their leaders, in the words of a French friend, want to ‘withdraw from the world.’”

And she added: “Above all, they are anti-austerity: They hate the budget cuts that they believe were imposed on their national governments by outsiders in the international bond market and by their own membership in the euro currency zone. Never mind that those same national governments had created the need for austerity by overspending and over-borrowing, or in some cases—most notably Greece—by funding vast, unaffordable and corrupt state bureaucracies over many decades.”

Well, the budget cuts were in a sense imposed by outsiders and in Italy and Greece the parties most responsible for over-spending and over-borrowing were the hardest hit in the elections – in Greece the two mainstream parties that have dominated politics there for the last 35 years, and in Italy the center-right parties that were in the coalition governments of Silvio Berlusconi.

In the UK, the local elections success of Labor, the party responsible for the country’s economic mess, can partly be put down to a series of poor decisions and cock-ups by the coalition government and to a general feeling in the country that “we aren’t all it together”.

In Italy and Greece, voters turned to fringe parties to express their distrust of the center. The traditional left did well in Italy but not as well as it should have given the circumstances. It didn’t do so because of the scandals that have hit some prominent leftwing politicians.

And it isn’t clear to me that Italian voters who backed the movement of Beppe Grillo, the comic-turned-blogger activist, were expressing anti-European, anti-globalization or anti-immigration positions.

True, Grillo wants Italy to drop the euro and re-introduce the lira, but is that what was uppermost in the mind of voters when they backed the comedian’s Cinque Stella movement? Of the more the more than 20 people who voted for Cinque Stella who I have spoken with in the last few days not one of them mentioned dropping the euro as Italy’s currency. Nor are any of them anti-immigrant and none of them were anti-European.

They say they voted for Cinque Stella to record a protest against many things – from the corruption of the mainstream parties of both the center left and center right to Silvio Berlusconi’s disastrous stewardship of the country and to the fat-cat Italian parliamentarians, the highest paid lawmakers in Europe.

And none of them were that critical of caretaker premier Mario Monti or his efforts to reduce the public debt or implement structural reform, including changes that would open up the country’s rigid labor market.

Monti’s government is a technocratic one and he and his government were not standing in the local elections. Interestingly, despite the pain Monti is causing people with cuts, reductions in pensions, etc, he has high popularity ratings in the opinion polls of more than 50 percent.

While all of my Cinque Stella voters had questions about austerity and the cuts – from the timing of them to where the cuts are being applied – they all accepted that Italy has to reduce its public debt, improve competitiveness and cutback on the country’s bloated public sector.

And why in the world would they vote for Berlusconi’s party or the Northern League, his onetime coalition partners, when they accept change has to take place?

After all Berlusconi implemented scant reform when he had the opportunity to do so and under his rule, Italy grew at an anemic annual rate of one third of 1 per cent and dropped further down league tables for economic freedom and competitiveness and media freedom. Under Berlusconi, there was a resurgence of the Mafia and increased public corruption. During his tenure his coalition partners approved 18 pieces of legislation that sought to protect his own personal business interests and to provide him with legal immunity for wrongdoing. Is that center-right record one that deserved to be rewarded? Would the voters in Italy have shown more adult seriousness by voting for the center-right?

Brendan O’Neill writing in Spiked in an article headlined “Posturing against austerity: an infantile disorder” strikes the same kind of notes as Applebaum, first misunderstanding that the Grillo vote was a protest one and not one aimed at the Monti government and then arguing that elsewhere the leftwing groups that made electoral gains are driven by a desire to avoid reality.

He wrote: “The alarming thing about Hollande and Alexis Tsipras, the comparatively youthful leader of Greece’s Coalition of the Radical Left, is that they are being treated seriously despite the fact that they, too, are a bit of a joke, a comedic interlude in mainstream politics who offer little, if anything, in the way of an alternative.”

Pairing Hollande with Tsipras seems a tad odd. The latter is far to the left of Hollande and has declared the recovery blueprint approved by the European Union and the International Monetary Fund (IMF) as “null and void” while the new French President has talked only of renegotiating the EU fiscal compact his predecessor, Nicolas Sarkozy, signed.

Hollande is an experienced and mainstream politician and arguably his vagueness during the election campaign on the details of what he would do in office is a reflection of political wisdom – he has avoided over-selling presumably in order to try to lower the expectations of his supporters. He has given himself room for maneuver. He has committed to balancing government spending and borrowing by 2017, avoided making commitments to increase public sector employment beyond education and even with his pledge to hire 60,000 additional teachers he has stressed that this will not be done overnight.

In short, it strikes me that voters on the whole in Italy, Greece and France turned to what they had on hand to punish the mainstream parties responsible for the economic mess while at the same time registering as best they could their opinion that the current approach to dealing with the crisis isn’t working. Is that infantile posturing?

Of course, the voters aren’t alone in being critical of the current austerity tactic. They have plenty of fellow-conspirators – to name a few, the International Monetary Fund; the Italian Premier; the President of the European Central Bank, Mario Draghi; the Financial Times economics columnist Martin Wolf; and The Economist magazine – hardly a bunch of leftwing or fringe loonies. They all argue for blending public debt reduction with growth measures.

Take what The Economist wrote in last week’s edition. “Germany will find itself isolated. It has pushed austerity too far and too fast. The myth of an expansionary fiscal contraction, the idea that deficit cutting would boost growth, has been largely dispelled. The latest evidence is that in a downturn the multiplier effect of fiscal tightening can lead to a deeper recession, making it even harder to cut the deficit.”

Or consider what Martin Wolf wrote in a column this week. “The fact that the policy for dealing with it (the crisis) has been such a disaster – sending unemployment figures through the roof and magically increasing budget deficits – only hastens the final act of this drama: the possibility that Greece will default, leave the euro and increase the contagion in Spain and Italy.”

Wolf argues that German Chancellor Angela Merkel will have little choice but to agree to some changes to the fiscal compact and to soften austerity in its current form. “Whether it is renegotiated, modified or supplemented with a growth pact is a matter of words.” And she has little choice not only because the economic realities demand it but the voters fired a warning shot.

 

 

 

 

 


Italian CEO Shot: A Reminder Of The Past

And as if to underscore the depth of anger in Italy with the economic crisis and the risks, if the politicians can’t get it right, unidentified gunmen on a motorbike shot in Genoa the chief executive of a prominent Italian nuclear engineering firm.  Roberto Adinolfi, CEO of Ansaldo Nucleare, was shot in the leg – a trademark tactic of the guerrilla group Red Brigades back in the 1970s.

There has been no confirmation that the shooting was an act of domestic terrorism, but the company was one of the first targeted by the Red Brigades when they launched their terrorism.

Whistling in the Dark

Bloomberg has a headline this morning that about says it all when it comes to the Eurozone’s political leadership – “Euro Leaders Aim to Buy Time to Save Currency.” More time?

For the past 18 months there has been dithering and inconclusive summits and failure at every turn to get out ahead of the crisis. Solutions promised and offered have failed to convince the markets and investors that a bottom has been put in to save the currency from collapse and the Eurozone from fracture.

With a new year we are where we were before: no viable political solution.

According to Bloomberg, European leaders are “seeking to buy time for the Spanish and Italian governments to wrest control over their debt.” But that isn’t something that is going to happen overnight or even in a few weeks or months. And getting control of their debt is linked to how the markets feel about the Eurozone generally and the level of confidence investors have in it and not just in Italy and Spain.

Neither country has a solvency crisis – or rather they didn’t. Their initial challenge was over liquidity – and that has been allowed to turn into pending insolvency.

In her end-of-the-year comments, German Chancellor Angela Merkel said her government will do “everything” to bring the euro out of the slump. The only way that can happen is if the Germans agree financial transfers to their poorer neighbors. That has to be done quickly now and speed means Berlin accepting Euro-wide debt consolidation and the issuing of Eurobonds backed by all.

The details of closer financial integration with stricter rules on individual government’s public expenditure can come later.

In the next three months some 157 billion euros ($203 billion) in debt will mature in the 17-member Euro area. And something solid needs to emerge from the scheduled Jan. 9 meeting between Merkel and French President Nicolas Sarkozy or those three months could be even more torrid that what we witnessed last year.

Shape Up

World Bank’s Robert Zoellick talks on a theme dear to this blogger’s heart – namely, that the political leaders on both sides of the Atlantic just are not performing and collectively are one of the main causes for the loss of confidence and market turmoil and economic malaise.

“What’s happened in the past couple of weeks is there is a convergence of some events in Europe and the United States that has led many market participants to lose confidence in economic leadership of some of the key countries,” he said.

So let’s see what happens at the summit between French president Nicolas Sarkozy and German chancellor Angela Merkel and whether they are able to lead and forge a way out of the Eurozone crisis. There is only one realistic alternative now: closer fiscal integration and a serious Eurobond system to bail out the weaker members. If that doesn’t happen, then the markets are going to starting testing with the targets again being Italy and Spain.

 

Vita Not So Bella: The View From Lazio

The foreign tourists are still visiting Largo di Bolsena and you can still hear the voices on the south Tuscan beaches of affluent Brits, Americans and north Europeans but the visitor numbers are down significantly – and the voices sound a little less sure than when the credit spigots were flowing.

This year in Lazio the consequences of the crisis are more obvious with local businesses complaining their takings are down. Lazio has never been the tourist hotspot of Tuscany or Umbria, but in the late 1990s, and until the financial crisis hit a couple of years ago, the region enjoyed a steady increase in foreign visitors.

And why not the – the countryside is every bit as lovely as Umbria to the north and the Lazio villages are gems. The region enjoys a fine coast and one of Italy’s most unspoilt large lakes with fresh clear water and excellent fish. Slowly but surely property prices had risen, driven by foreigners unable to afford Tuscan prices and Romans seeking tranquility outside the city.

Although property prices have not declined in the last two years they have flattened now and locals appear to be getting more realistic when it comes to foreigners and what they will pay.

If one were to guess which north European countries are not doing badly in the crisis, spotting country number plates in Lazio wouldn’t be a bad way of making an assessment. Throughout the summer there have been few British, French or Belgian cars touring the lanes and roads of Lazio. Dutch and German have been far and away the most obvious. And for the first time in a decade of visiting or living in the region, I noticed some Czech and Polish cars.

But away from the tourists, life for my neighbors and other ordinary Italians has got seriously harder. A psychologist in the nearby town of Bagnoregio told me that many of her clients say they have cut down on the basics and now have only one major family meal a day. Supporting evidence of this would include the local restaurant owners complaining of much lighter traffic and of several local greengrocers telling me that their takings this year are down by about 40 percent.

With the political crisis intensifying – most Italians expect an early parliamentary election this autumn and the departure of Silvio Berlusconi – there is fear about the future in the air.

One thing that Italy does have going for it – and one not noticed by many of the financial commentators in the UK and the United States — is that while the country has been as free and easy as its south Mediterranean neighbors with government spending, Italy owes a large proportion of its debt to itself and not to foreigners – Italian savers have been propping up Italian government expenditure by buying government bonds.  A downgrading by the credit agencies of Italy would have less effect than a downgrading on several other Europeans countries.

Italian economic performance is as ever hard to assess: about 30 percent, and maybe more, of the Italian economy is black, a testimony to traditional widespread tax evasion.

Even so, signs of private and public belt-tightening are clearer now. My local village of Celleno will shortly see the closing of the local school, a consequence of the decision to consolidate schools in the region.

Home for the Holidays

The UK Telegraph reports that record numbers of Britons are staying in the UK for their summer vacations. Debenhams are sending urgent supplies of flip-flops to seaside towns that were deserted in past years.

It isn’t only Britons who are staying close to home for the summer. The north-east coastal towns of Italy have seen a fall-off of the tourist trade with more than 30 percent declines from the numbers of last summer. And last year was no fun for the hotels of Rimini and other northern seaside towns with 20 percent or more declines then.

Where I am working from currently in Lazio, the numbers are clearly down as well. Largo di Bolsena is without the Dutch and Swedes this year, with just a few around and those normally are the ones who own property in the area. And this weekend the lake was crowded with local families who can’t afford to travel south or visit overseas. The Tuscan beaches are virtually empty on weekdays.