Since the onset of the global financial crisis, the European Central Bank has been desperate to funnel cash into the eurozone’s financial system, in the hope this would boost investment and growth.
Yet, despite steep cuts to interest rates and several rounds of cheap loans to banks, the eurozone is still struggling to get enough investment projects off the ground. Last week, the ECB launched an ambitious programme of quantitative easing aimed at prompting banks to lend more by lowering the interest they receive on government bonds.
But what if Europe’s investment problem was not the result of a shortage of liquidity? Read more
The triumph of the anti-austerity Syriza party in Greece’s general election has put back on the table the vexed question of what to do with Athens’ debt. Economists tend to disagree over how sustainable this burden really is: some point to the sheer size of the liabilities, saying Athens will never be able to pay them back. Others emphasise the favourable conditions which the Greek government has secured on official sector loans in two rounds of restructuring: these include heavily subsidised interest rates and a lengthening of the average maturity of the debt, which now stands at 16.5 years, double Italy’s or Germany’s.
One figure on which everyone tends to agree, however, is that Greece’s public debt is 177 per cent of gross domestic product, the highest level in the eurozone. Well, everyone but a private equity group and a number of accountants, who think the relevant figure could be as low as 68 per cent. Read more
The halving of oil prices over the past six months has caught pretty much every economist by surprise and prompted a rush to explain the reasons behind this astounding drop and the consequences for the global economy.
On Wednesday, the World Bank has weighed in with a study included in one of the analytical chapters of its twice-yearly Global Economic Prospects. The Bank has good reasons to study the oil price drop: the sliding cost of crude will have profound implications for growth rates, inflation outlooks and the public finances of emerging markets, whether they are oil-producers or oil-importers. Read more
Today Germany and France will meet in their World Cup quarter final in Rio de Janeiro, the latest episode in one of Europe’s classic football rivalries. But off the pitch, a different duel is gripping the continent’s political scene: the one between Germany and Italy. Read more
For decades Italy has been dragged down by the pervasive presence of criminal organisations. But, for once, the mafia may have come to the country’s rescue. Read more
(OLIVIER MORIN/AFP/Getty Images)
Whenever any centre-left leader comes to power in Europe, there are always questions over who he or she will be compared to. Take François Hollande: only days after his election to the Elysée, commentators were already wondering whether he might be France’s Gerhard Schröder. The hope was that he could reform France’s labour market from the left, just as the former chancellor did in Germany in the early 2000s.
Matteo Renzi, who is set to become Italy’s youngest ever prime minister, is bound to draw such comparisons. When Time magazine chose to feature the then 34-year old mayor of Florence on its front page in February 2009, the US weekly asked whether he might be Italy’s Barack Obama. In an interview to the Italian daily Il Foglio, Mr Renzi compared himself to Tony Blair, saying he wanted to transform the Italian left just as Britain’s three-times prime minister did with the Labour party. The media-savvy Mr Blair certainly remembered Mr Renzi’s aspirations when he called on Europe’s leaders to “get fully behind” Italy’s new leader. Read more
It takes a little more than 15 minutes to cover the mile-long distance that separates the Bank of Italy from the ministry of the economy and finance in central Rome. But the upper echelons of the two institutions dominating the commanding heights of Italy’s economy have traditionally been closely linked by a revolving door. Read more
Beppe Grillo on the campaign trail
Two months ago Beppe Grillo came out as the big winner of Italy’s general elections. His Five Star Movement, which was created only in 2009, came within a whisker of becoming Italy’s single largest political force. His vote tally in the Lower House was an extraordinary 8.7m, more than Silvio Berlusconi’s People of Liberty party and only a few hundred thousand votes less than the centre-left Democratic Party. Read more
(Photo by Christof Stache/AFP/Getty)
The former Italian prime minister Giuliano Amato once compared the powers of Italy’s president to an accordion. Just as the box-shaped musical instrument can expand and contract, the same is true for the influence of Italy’s head of state: what the president can or cannot do largely depends on the strength of the political parties.
On Thursday, Italy’s 949 MPs and 58 representatives from the 20 regions will convene to elect the successor to President Giorgio Napolitano. Amato himself is a candidate, alongside former prime minister Romano Prodi, former European commissioner Emma Bonino, and others.
The political stalemate following February’s inconclusive election means that the new president will have to be picked on the basis of a last-minute deal between the centre-left, (the largest alliance in Parliament) and at least one of the other three significant forces – the centre-right coalition of the People of Liberty and the Northern League, Beppe Grillo’s Five Star Movement and Mario Monti’s Civic Choice. There are no clear favourites for the job. Yet, this election will matter a great deal for Italy and for those who are interested in a solution to its political crisis.
For decades, the President’s job was seen as largely ceremonial. True, the President is the head of the judiciary and of the armed forces. But he doesn’t have anything like the kind of executive powers held by the French or American presidents (though he can veto any law if he believes it is against the constitution). Read more
The Italian dog that did not bark is one of the great untold market stories of the past month. The yield on Rome’s 10-year bonds is around 4.3 per cent, a level not seen since the end of January.
Chart: Italy’s 10-year bond yield (black line) over the past five years; blue line shows the yield on the German 10-year bund
(Chart courtesy Reuters)
The spread with the Bund, which has obsessed Italians since the market panic at the end of 2011, has narrowed to just above 300 basis points. It almost looks as if February’s inconclusive election and the accompanying political uncertainty do not matter. This is puzzling, so here are a few tentative explanations:
1) Mario Draghi’s magic. The pledge by the president of the European Central Bank last summer to do “whatever it takes” to save the euro is the single most important explanation for the relative quiet on Italy’s bond market. The Outright Monetary Transactions scheme, whereby the ECB will purchase unlimited quantities of debt of countries in difficulty, has so far proven a remarkably resilient firewall. Read more
Situation vacant? Mario Monti (Getty)
There were two big job vacancies in Rome last month. The Catholic Church began looking for a new pope after the shock resignation of Benedict XVI. Meanwhile, Italians went about the business of picking a new head of government who would end Mario Monti’s technocratic interlude.
The Vatican is not exactly known for its speedy decision-making. Yet it only took the conclave of cardinals a couple of days to elect Jorge Mario Bergoglio as the new head of the church. Pope Francis – as he is now – is already making headlines with his new message centred on the need for a humbler and more austere church.
On the other side of the Tiber, Italian politicians are still struggling to choose a new prime minister. Today and tomorrow, President Giorgio Napolitano is meeting party leaders and other institutional figures to talk about what to do next. But Italy-watchers do not expect white smoke to come out of the presidential palace any time soon.
Last month’s inconclusive elections have produced a three-way deadlock in the Senate between Pier Luigi Bersani’s centre-left coalition, Silvio Berlusconi’s centre-right alliance, and Beppe Grillo’s Five Star Movement. The only solution to the impasse is a government that is backed by at least two of these forces. But this trilemma has no easy solution. Read more
When Cardinal Jorge Mario Bergoglio decided he would be called Francis in his new life as Pope, he knew people would understand that his choice was charged with symbolism.
As some of the cardinals present at the conclave have confirmed, the new pontiff’s choice is in honour of St Francis of Assisi, who lived and preached in Italy between the end of the 12th and beginning of the 13th century. Francis was the son of a wealthy merchant who abandoned his well-off lifestyle to live in poverty. The monastic order he set up, the “Lesser Friars” (who became known as Franciscans after his death), has absolute poverty as a rule. This applies both individually and to the monastic communities.
St Francis is one of the most venerated figures in the Catholic world thanks to his mysticism and rectitude. Yet no pope had ever dared to pick his name. This is in sharp contrast to the number of times Gregory (16), Leo (13) and Pius (12) have been chosen. Read more
I have just spent a few days traveling across Veneto, Italy’s industrial heartland in the north east of the peninsula. One of the tasks I had set myself for this trip was to understand whether Italy’s economic crisis is fuelling euroscepticism.
Italy has traditionally been among the continent’s most europhilic countries. To the astonishment of outside observers – particularly those from the Anglo-Saxon world – Italians have seemed relatively at ease with the idea of handing more and more powers over to Brussels.
One of the reasons behind this attitude is their deep lack of trust in their own political class. The euro is seen as a bridge to modernity and progress, rather than a drag on national sovereignty.
After the wave of austerity which has recently hit Italy, and which Brussels was at least partially responsible for, I expected this attitude to have become somewhat less positive. Veneto was an excellent testing ground for its resilience. This wealthy region is governed by Luca Zaia, from the Northern League, the most eurosceptic among Italy’s mainstream parties. Veneto has a strong export-oriented manufacturing sector, which can no longer rely on competitive devaluations as it did in the 1980s and 1990s, before Italy entered the euro.
This point was made to me by Roberto Brazzale, a food entrepreneur from the province of the city of Vicenza, who has off-shored much of his production of parmesan cheese and mozzarella to the Czech Republic. “We must exit the euro,” Mr Brazzale said. “And do it before our industrial base is completely wiped out”. Read more
A few weeks ago I was in Oxford for the screening of Girlfriend in a Coma, the film on Italy’s decline written by Bill Emmott, former editor of The Economist, and Annalisa Piras, an Italian journalist and filmmaker. The audience – consisting mainly of British Italophiles and young Italian researchers who had left the country’s decaying universities to find shelter in British academia – gave the documentary a warm reception. During the discussion I chaired after the screening, Emmott conceded that taking the movie to Italy would pose a far greater challenge. He joked that he and Piras would need bodyguards. Their movie is in fact a brutal exercise in truth-telling, aimed at holding to account those who have run Italy over the past two decades.
Italy’s first reaction has, indeed, proved rather unwelcoming. The Italian premiere of Girlfriend in a Coma, scheduled for February 13 at MAXXI, a museum of contemporary art in Rome, was suddenly cancelled on Friday. Read more
Mario Monti (L) with Silvio Berlusconi in November 2011 (ALBERTO PIZZOLI/AFP/Getty Images)
This week’s alliance between Silvio Berlusconi’s People of Freedom Party and the right-wing Northern League was the last piece of the jigsaw ahead of Italy’s general elections, scheduled for 24-25 February.
With six and a half weeks to go, the situation is still too fluid to make a call on who will win. But, for those not versed in the art of Italian politics, we thought it would be helpful to explain the main players involved, and outline the chances of the two very different men who have held the most influence over Italy in the past few years – Mario Monti and Silvio Berlusconi.
- A centre-left coalition dominated by the Democratic Party, in alliance with the more left-wing Left, Ecology, Freedom party
- Berlusconi’s right-wing alliance between his People of Freedom and the Northern League
- A centrist coalition led by Italy’s technocratic prime minister, now turned politician, Mario Monti. This includes the PM’s own list, Civic choice for Monti, the Christian Democrats and a smaller centre-right party, Future and Freedom for Italy
- The Five Star Movement, brainchild of the comedian-cum-blogger, Beppe Grillo
- A left-wing group, Civil Revolution, set up by the former anti-mafia judge Antonio Ingroia
Italy’s cumbersome electoral law, which is different for the Chamber of Deputies and the Senate, makes the lives of the phsephologists even harder. Here’s what we know about the situation in each house. Read more