Posts Tagged ‘Italian professional classes’

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La mamma severa

September 3, 2012

Queuing on the south side of the San Gottardo tunnel in Switzerland surrounded by Dutch and German cars, I wonder whether my fellow travellers have been convinced by their summer sojourns in Italy that their southern neighbour is changing. Myself, I cannot see it. Italy is miserable from the cuts that have been going on for years. But structurally the story is the same. In this respect, Mario Monti appears to be a continuation of Silvio Berlusconi, minus the bunga bunga.

What has Monti done? A labour law that no one in Italy believes is more liberal than the old one. Nothing to simplify legislation, the tax regime, or the bureaucracy. And absolutely nothing to create a functioning, more efficient judicial system. Just budget cuts. In sum: Berlusconi 2.0.

I am sitting in a German petrol station pondering this when I realise I have to get out of my car to fill it up with LPG. Unlike in Italy, there is no law in Germany that mandates that only a petrol station employee can fill a car up with gas. I glance wistfully over my shoulder, recognising that feudalism has its upside.

Mr Market, meanwhile, is feeling quite sanguine, having convinced himself that Frau Merkel is readying her cheque-book to bail Italy out. Or at least being ready to let Flexible Mario at the ECB write the cheque. The ECB is to announce the latest terms of its support for so-called ‘peripheral’ countries later this week.

Mr Market, methinks, underestimates Frau Merkel. Italians have been asking for 20 years for a northern European mamma who will put the kibosh on their bad habits, and I suspect they are to be rudely surprised by getting what they wished for. One way or another, with the failure of Monti, a bunch of Germans and IMF folk are going to end up moving to Rome to oversee the structural reforms that Italy requires. Either that, or it’s out of the Euro.

Related posts:

Why Super Mario is made of paper. As his 2012 budget foretold. My own cunning plan to solve the Italian debt crisis. How the buck stops in Paris.  The global picture of what we are dealing with. Why you should never listen to the Brits about Europe.

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What price incompetence?

February 17, 2012

We now know. US$4m is to be paid for Amanda Knox’s story of torture at the hands of Italy’s ‘professional’ classes. It is a lot of money. But then the publishers have calculated that the appetite for a tale of medieval habits sustained in a modern society is considerable. I reckon they will get their money back. Italy is something truly special.

More:

Here is Douglas Preston, who already wrote a book about Giuliano Mignini.

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The parcel is passed

December 11, 2011

Giuliano Mignini, the prosecutor in the Sollecito-Knox case, has had his conviction for abuse of office — relating to persecution of journalists and illegal investigations (details here under the 20 April 2010 entry) —  quashed after the Florence appeal court ruled his case should have been heard in Turin.

In theory Mignini can be tried again. But it looks like his case can has been kicked way down the road.

Despite Mario Monti’s promises of ‘Change-Italy’, at ground level things look very much like business as usual.

The Italian press has barely touched on Mignini’s successful appeal. There is a short report here in Italian, and an even shorter one here in English.

 

 

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The wrong menu

December 5, 2011

With the publication of Monti’s ‘nation saving’ budget in Italy (here in Italian) and news that Frau Merkel and Sarko have agreed a ‘fiscal compact’ to save the Euro we can see the shape of a week that may postpone Italy’s exit from the Euro but which will surely make it yet more likely in the long run.

First, Monti’s budget looks like a classic Italian serving of pointless, bureaucratic complexity. There’s another expensive-to-collect tax on yachts, and one one private aircraft, which will doubtless raise a net of about 8 euros. There is the return of property tax on first homes, but at a pretty low level and with various possible exemptions. Note that there is no attempt at simplification of different house-related taxes by, say, merging the new levy with the tax on rubbish disposal (known by the acronym TARSU), and sacking half the people who collect these taxes. Monti, may be a technocrat in theory, but this looks like the standard, tried-and-failed fare of the left-of-centre parties. On that note, the Welfare Minister cried while announcing pension cuts (perhaps troubled by the enormity of her own salary).

Why not do tax like Italy does its food? Simple, digestible and to the point. And then apply the tax. You never get to leave a restaurant without paying.

Meanwhile Frau Merkel and Sarko are coming up with a scheme to sanction countries like Italy that don’t stick to budget targets. This plays to German political opinion, but completely misses the point.

It treats Italy as a debt problem. But it isn’t. Italy is a growth problem that can only be resolved with legal system, bureaucratic and labour market reforms that make growth possible. Italy needs to be made to work institutionally.

All this Merkel-Sarko deal is likely to do is to keep the fiscal squeeze on Italy and provide a temporary respite for the Euro. But if Italy cannot grow it will never be able to pay its debts, even at 5% interest.

What we are likely to get this week will be the worst possible outcome. There won’t be pressure for pro-growth reforms from Merkel. And Mario’s budget performance suggests he can’t produce institutional change either.

The Italian economy will just shrink away faster than cuts can be made and taxes levied.

More:

The FT (sub needed) on Merkel and Sarko’s agreement.

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A bit of Perugia in all of us

December 2, 2011

The trial of police officers involved in a wrongful 1980 conviction of 3 men for murder in Wales has collapsed on a technicality. The case has interesting parallels with the Sollecito and Knox case in Perugia. The three convicted men left no forensic/DNA evidence at the crime scene, despite a murder by 50 stab wounds. The man later convicted of the murder left plenty of forensic evidence, but police were obsessed with the other three suspects. As in Perugia, their theory was more important than the investigation.

It all looks rather Italian, as does the failure to complete a trial of the police officers alleged to have perverted the course of justice. However we must note that there have already been two enquiries into this case, and there will now be a third. That isn’t the same as Perugia, where the expectation is that there will be no enquiry, nothing will change, and police and magistrates will not even get a telling off.

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Improbable ideas

December 1, 2011

Martin Feldstein pens a curious opinion piece (FT sub needed) arguing that Italy is perfectly capable of saving itself from a Euro exit. Did anybody ever suggest otherwise? Italy is capable of anything. The problem is that the country’s political and professional classes are incapable of putting national interest before their own.

Is there a mechanism to make the professional class behave? My thought is that rather than some counter-productive tax raid on bank accounts (as is often suggested in Italy), what would be much more effective would be a mandatory conversion of a share of bank deposits over a certain minimum into government bonds yielding 5 percent interest. No one would have their savings confiscated — indeed they would get more interest than in the bank. Such a move would have the effect of forcing the Italian elite to take responsibility for debt and therefore for economic reforms that would lead to growth.

The cash raised could be used to pay down a chunk of debt, thereby reducing interest demanded on the rest. But the real objective would be to get Italians focused on reform.

It is often pointed out that Italy’s private wealth is three to four times its public debt. The real issue is getting people to take responsibility.

The problem? Can you imagine Monti calling the MPs into a closed-door meeting of parliament and demanding they vote to support such a move? They’d all be trying to make mobile phone calls to their bankers ordering TTs to Switzerland.

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The gentle breeze of British hypocrisy

November 12, 2011

The Economist has published its sixth, and presumably final, cover story on Silvio Berlusconi. The headline – ‘That’s all folks’ – is supposed to evoke the cartoon quality of his premiership. But coupled with a backdrop of Sil set in a painting of end-of-Empire Roman lassitude, it is too busy. Far more visually effective was the June 2011 cover with a simple photo of Sil and the line ‘The man who screwed an entire country’.

I haven’t been the biggest fan of The Economist’s coverage of Italy because it has focused so overwhelmingly on Sil — rather than on a the malaise of an entire professional class which he symbolises. What sets Italy apart is that, relative to its level of economic development, it has the most backward, self-serving professional class and professional institutions of any state in the world. This includes, but is far from limited to, its political and legal and fiscal institutions.

There is also a very English undercurrent of hypocrisy in the manner in which the British elite discusses the Italian crisis with a told-you-so attitude. The Economist is particularly guilty of this, putting the boot in to the German response to the crisis on a weekly basis.

What is forgotten is how the Germans are left to do the political heavy lifting in Europe almost single-handedly. They have a French ‘assistant’, but he is barely worthy of the name.

If Britain had joined the Euro, things would have been different. There would be two big political grown-ups in the Euro-zone instead of one, and that would have made the job of dealing with Italy so much easier.

You cannot argue with Britain’s decision to stay out of the Euro from a selfish, pragmatic perspective, but anyone who supported that decision should limit themselves when yelling from the sidelines about what to do now. How would you like to be Merkel, put in a team with Sarko, and expected to sort out Greece and Italy?

If Britons are honest, they must concede that post-war Germany has done the bulk of the work in creating a stable, prosperous and progressive Europe while the British — famed as people of action — stood around bitching. And when Britain realised it desperately needed to be inside the Common Market in the early 1970s, it needed German support — against French opposition — to get in.

Germany, not Britain, is the moral leader of Europe in the past half century.

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Trust

November 10, 2011

Nouriel Roubini, who lived for 20 years in Italy, has the day’s best post on the evolving Italian crisis. The concluding paragraph is a reasonable summary of what is required by Italy’s Euro partners to keep it in the currency bloc at this point:

‘Only if the ECB became an unlimited lender of last resort and cut policy rates to zero, combined with a fall in the value of the euro to parity with the dollar, plus a fiscal stimulus in Germany and the eurozone core while the periphery implements austerity, could we perhaps stop the upcoming disaster.’

What Roubini does not spell out is why this is unlikely to happen. When all the talking is done, it is a simple matter of trust.

Northern Europe does not trust Italy to push through the reforms that would make the effort and expense worthwhile.

The Matilda problem that I highlighted back in August is coming home to roost.

My own thought for the day is Article 54 of the Italian Constitution:

Those citizens to whom public functions are entrusted have the duty to fulfil such functions with discipline and honour.

It seems the last Euro-era chance to interpret that line in a more mundane and literal fashion may fall to Mario Monti.

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Studying the classics

November 9, 2011

They say you can learn from the classics. So here are my bullet points on the heroic struggles of Europe’s ancients.

 

How Greece did it:

1. Get money from EU in return for reforms.

2. Tell EU/IMF you need to hold referendum in order to get population on board.

3. Abandon referendum when rest of Europe says this is devious and should have been discussed up front.

4. Bicker and look ridiculous.

5. Leave Euro and return to Third World.

(6. Feel really bad when Turkey joins EU and takes commitments seriously.)

 

How Italy could do better.

1. Tell EU you need to hold referendum in order to get population on board.

2. Form government of national unity. Agree comprehensive package of labour market, justice system and fiscal reforms with EU/IMF to be overseen by IMF.

3. Don’t bicker. Hold referendum in January.

4. Implement reforms under IMF oversight.

5. Remain in Euro and begin to be respected member of First World instead of being resident joke member.

(6. Not have to feel bad when Turkey joins EU and takes commitments seriously.)

 

But which option to go for?

Rodin's epic representation of the Italian politician

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The song of a lost nation

November 9, 2011

Here’s a new song to sing to keep up spirits as we wait for Italy to fall into the abyss:

IMF, IMF, IMF

IMF, IMF, IM-E-EFF

IMF, IMF, IMF

AYE EMM FFFF

 

Because even though the country is among the richest in the world, it can’t look after itself.

And take a look at the bio of David Lipton, who the IMF had already scheduled to go to Rome next week (before Italian bond yields hit 7.5% this evening). This guy appears to have the cv from hell. He worked at disaster bank Citi in the run-up to the global financial crisis. He (presumably) filled his boots at hedge fund Moore prior to that. He was part of the Clinton financial deregulation road to hell  team in the 90s. Which came just after he had worked with Jeff ‘did I say that?’ Sachs to provide restructuring ‘advice’ to developmental superstate Russia in the 1989-1991 period. Maybe there really is a God. And he really has lost patience with Italy.

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