Italy

♦ In the first installment of our Great Tax Race series, Vanessa Houlder examines how the Netherlands and Luxembourg managed to book more foreign direct investment than the US, UK and Germany together. Exploitation of cracks in the international tax system has ignited intense anger from an austerity-weary public. Matt Steinglass looks at how the Netherlands wants to change its tax haven image, but is wary of scaring businesses away.
♦ Italy has a new government and it has already been met with mayhem.
♦ Just after winning the most votes in Iceland’s parliamentary elections, the head of the centre-right Independence party has said the government needs to focus on restoring growth.
♦ Anne-Marie Slaughter thinks President Obama should keep the Rwandan genocide in mind when weighing up action in Syria.
♦ The 26-year-old Chinese entrepreneur who was kidnapped by the Tsarnaev brothers describes his harrowing experience. The Boston Globe has also pulled together a timeline of the hunt for the bombing suspects.
♦ William Zinsser, author of “On Writing Well”, is still counselling people on the subject at the age of 90. He holds one-to-one sessions with people who read their writing out to him, as he cannot see, and only accepts sandwiches as payment.
♦ Maryam Sharif takes to the street to canvass for her father who is likely to become Pakistan’s PM for a third time: “It’s a beautiful feeling to be loved”.
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Ferdinando Giugliano

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

The Austerity Debate
Europe may have hit the political limits of how far it can go with austerity-led economic policies because of the growing opposition in the eurozone periphery, according to the president of the European Commission.
Tim Harford tells the story of Thomas Herndon, the student who uncovered a mistake in a famous economic paper that has been used to make the case for austerity cuts, and considers what it means for austerity economics.

Italy Deadlock
Choking back tears in his inauguration address, Giorgio Napolitano, who at 87 reluctantly accepted an unprecedented second mandate as Italy’s president, slammed the country’s political parties for their failure to reach agreement and for the “unforgivable” lack of political reforms.
♦ Tony Barber argues that public outrage is not bred only by economic crisis, and that politicians in Italy (and elsewhere in Europe) should get their houses in order.
♦ Italy’s political and economic torpor is epitomised in the ruined and abandoned city of L’Aquila.

Elsewhere
In northwest Pakistan, militants are using bombs as campaigning tactics ahead of the May parliamentary elections.
♦ It’s the UK’s turn to host the G8 and Richard Dowden, director of the Royal Africa Society, wants to know if it will do anything to stop companies avoiding tax in poor countries: “More important than giving aid would be to stop doing bad things to poor countries. The worst thing we – the British – do is to maintain the world’s most iniquitous secret tax havens.”
♦ In the past year, two trillion dollars has not been reported to the IRS because “ordinary Americans have gone underground, and, as the recovery continues to limp along, they seem to be doing it more and more.”
Kidnappings of ordinary Syrians are on the rise as lawlessness spreads.
♦ The byline was borne of a need to make reporters more responsible for what they wrote about the Civil War in the US.
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Esther Bintliff

Boston

♦ Overnight, one of the two suspects in the Boston Marathon bombings was killed during a car chase. Officers have mounted a manhunt to find a man believed to be the other suspects, reports Robert Wright. The FBI has issued photographs of the suspects and details are beginning to emerge about their background. Updates throughout the day on FT.com

Gun control and a captured Senate?

♦ The US Senate on Wednesday voted down two measures that would have imposed tough new rules on who can buy guns. The Guardian reports this morning that all but three of the 45 senators who voted ‘No’ received money from firearms lobbyists.

♦ Gabrielle Giffords, the former Arizona congresswoman who was shot in the head in 2011, lambasted the senators in an Op-Ed for the New York Times. “Senators say they fear the N.R.A. and the gun lobby. But I think that fear must be nothing compared to the fear the first graders in Sandy Hook Elementary School felt as their lives ended in a hail of bullets… These senators made their decision based on political fear and on cold calculations about the money of special interests like the National Rifle Association, which in the last election cycle spent around $25 million on contributions, lobbying and outside spending.”

Elsewhere

♦ The FT’s Guy Dinmore visited L’Aquila, four years after it was devastated by an earthquake. Reconstruction there has all but ground to a halt, through lack of money and paralysing politics – making the city “the ultimate symbol of Italy’s great stagnation.”

♦ Tom Feiling writes for the new digital magazine, Aeon, about why Colombia’s FARC guerrillas are still resisting the coming peace. “Is it drug money or the romance of revolution that’s to blame?“ Read more

Ferdinando Giugliano

An elderly man plays his accordion at the old town market in Warsaw, Poland, on June 24, 2012 (CHRISTOF STACHE/AFP/GettyImages)

(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

Ferdinando Giugliano

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 of Reuters

(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

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Ferdinando Giugliano

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

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  • Tony Barber argues that a decontamination of Italian politics must come before economic salvation, and the two issues should never be separated.
  • Clown-turned-politician Francisco Everardo Oliveira Silva was elected into the Brazilian congress with a record number of votes in 2010. However, the joy of his campaign has given away to a weariness of the politician’s life: “You pass whole days here doing nothing, just waiting to vote on something while people argue and argue.”
  • “Enemy-initiated attacks” in Afghanistan have stayed constant from 2011 to 2012. The reported 7 per cent drop was actually the result of a clerical error.
  • Is it a bird? Is it a plane? No, it’s a barrel full of pork that no longer exists. The Washington Post reports on the tiny local airports in the US that attract plenty of federal spending, but very few planes.
  • Tunisians and Egyptians have to fight for their right to do the Harlem Shake.

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