Monthly Archives: June 2005

Sunday’s Referendum In Italy

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This article provides a reasonable background brief on the vote.

The number of infertile couples seeking help abroad has tripled since lawmakers in Roman Catholic Italy crossed party lines last year to approve one of Europe’s most restrictive laws on assisted reproduction. They wanted to crack down on what many saw as a medical Wild West where a 62-year-old woman had become a mother and a maverick doctor has bragged about cloning babies.

But far from ending the controversy the legislation has sparked the most heated moral debate since divorce and abortion were legalised in the 1970s and has prompted Pope Benedict, elected in April, to make his first foray into Italian politics. This weekend the standoff will come to a head with a four-part referendum that, if passed, would significantly change the law. The poll has shattered traditional political alliances and elicited emotional appeals from church pulpits.

No-Win Situation For The EU Commission?

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Italy’s Finance Minister Domenico Siniscalco is in defiant mood. ?The times of creative finances are over,?, he told a parliamentary committee in Italy today. By ‘creative finances’ he means a cost-cutting exercise. He means any serious attempt to bring the Italian deficit into line this year. What he is in fact saying is that he is prepared to try bring Italy’s deficit below 3 per cent of GDP in two to three years time (there are of course elections next year and Siniscalco in all probability won’t be in office to carry this through) but that he is not prepared to ?strangle? the economy by introducing an emergency budget next month.

This now becomes a very serious problem for the EU commission. After the defeat of the constitution in the recent polls, the Commission is badly in need of some credibility. After the ‘locura’ of recent days, the euro is badly in need of some credibility. Sticking to the Stability and Growth Pact would help to give credibility. But sticking to the SGP would also send Italy further into recession. This is known as double bind. Mr Siniscalco has Mr Almunia with his back to the wall. Of course the recent threat of a referendum is all about this.

According to the FT:

“Sandro Bondi, national co-ordinator of Mr Berlusconi’s Forza Italia party, complained on Tuesday about the European Commission’s ?bureaucratic attitude? to Italy’s public finances, and said it risked ?transforming Italy from a champion of a united Europe into a country pervaded with anti-European feeling?.”

I think this has a name, it’s called blackmail. Either you let us do what we want to, or we’ll make you pay for your efforts. I always thought we should have acted much, much earlier against Berlusconi. I hope we all don’t really regret being so tardy in waking up. To be continued.

When You’re Done You’re Done

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You know I’m sure most of you think my constant references to Argentina in the context of Italy’s economic problems is troubling, possibly even irritating. You may well be right. I have to say that I followed Argentina steadily from 1998, waiting to see the inevitable happen. The principal problem was, lets be clear, the 1:1 dollar peg. This was the epoch of the internet/ICT boom, and a rapidly rising dollar. It’s not clear to me at all that had Argentina pegged to the dollar in 2002 it would have had the same problems so quickly. One of the problems with being attached to a rapidly rising currency is that your imports get cheaper, and your exports dearer.

Now for an apochryphal story. Late in the crisis, before the geyser finally blew, back in early December 2001, a friend of mine visited Argentina. Seeing some nice shoes in a shop window he entered the shop (you will remember Argentina was famous for its leather products: all those cows). On asking where the leather came from, he was informed ‘it’s from Brazil, Argentinian leather is too expensive’. One month later it was all over bar the shouting. Well…..
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Elections in Albania (I)

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So Albania is having a general election. The voters will go to the polls on July 4, in a little over three weeks.

The Albanian electoral system is rather interesting IMO. The Parliament has 140 members. 100 members are elected in “zones”, one-member districts with a first-past-the-post system, rather like Britain. But 40 members are elected at large, using party lists. All the parties that get more than 2.5% of the vote will divide these 40 seats among them, proportionately.

I don’t know anyone else who uses this mixed system, though I’m sure it can’t be unique to Albania.
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More News From Italy

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Things really are starting to hot up: The European Commission said Wednesday it is investigating the reasons why Italy’s central bank intervened in foreign takeover bids for Italian banks.

The European Union’s head office said it had received a letter from the Bank of Italy explaining its actions in the recent takeover bids by the Netherlands’ ABN Amro NV for Banca Antonveneta SpA and Spain’s Banco Bilbao Vizcaya SA Argentaria for Banca Nazionale del Lavoro SpA.

The Bank of Italy monitors the country’s banking sector and has the power to veto all mergers and acquisitions. However, EU open market rules mean banks from other member nations should be allowed to operate in the Italian market under the same conditions as Italian rivals.

The Bank of Italy Governor Antonio Fazio has rejected criticism that he favors domestic players over foreign banks, insisting last week that regulatory decisions are “neutral with regard to the nationality of the players involved.”

Now It’s Footwear

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The EU’s trade dispute with China risks spreading from textiles to footwear after the EU released data Wednesday which purported to show that Chinese shoe imports had surged since the end of quotas at the start of the year.

“Responding to concerns of European shoemakers, the European Commission said imports of leather shoes and textile slippers had soared nearly eight-fold in the first four months of 2005, pushing down prices on European markets by 28 percent. Shoemakers from Italy have sent more than 200 letters of complaint to the Commission in the past two weeks, according to Leonardo Soana, director general of Italy’s National Footwear Association.

They charge that China, and to a lesser extent Vietnam, are dumping leather shoes on the European market and putting shoemakers out of work.

Soana told Dow Jones Newswires that Italy’s shoe industry will present a formal complaint on June 15, alongside claims by Spain and Portugal. French, Greek and Polish industry groups will back calls the for tariffs on Chinese shoes, he said.

Looking at the list, it is pretty clear which parts of the EU are being most hit by these ‘bottom end’ imports from China, and why: they are generally the economies which are most challenged by the need to move up the value chain. That being said, and correcting slightly an earlier renminbi post, it is obviously the case that the rise of the euro against the dollar, has also been a rise against the renminbi, 40% or so in 3 years, so it is clear why there is a ‘pain barrier’ now in Europe.

However on the free trade angle, Stumbling and Mumbling has a nice quote from Scottish Economist and Philosopher David Hume which is very much to the point:

“There are few Englishmen who would not think their country absolutely ruined, were French wines sold in England so cheap and in such abundance as to supplant, in some measure, all ale, and home-brewed liquors: But would we lay aside prejudice, it would not be difficult to prove, that nothing could be more innocent, perhaps advantageous. Each new acre of vineyard planted in France, in order to supply England with wine, would make it requisite for the French to take the produce of an English acre, sown in wheat or barley, in order to subsist themselves; and it is evident, that we should thereby get command of the better commodity.“

This Is An Interesting One

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From Malta Today:

The European Commission is asking the Maltese government to explain its policy of banning journalists from immigrants? detention centres in response to a petition signed by 100 journalists and editors last February.
European Commissioner for Justice, Freedom and Security Franco Frattini told the European Parliament that the Commission was demanding information from the Maltese government about the total media ban imposed by Home Affairs Minister Tonio Borg.

Replying to parliamentary questions made by Labour MEP Joseph Muscat and H?l?ne Flautre (Greens), Frattini said he was aware of the journalists? petition and of Borg?s media ban and that he was seeking information from the government. The Commission is also aware of the conditions in immigrants? detention centres which have been the subject of much criticism from international human rights agencies and organisations.

EU Budget Reform Having Problems

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Despite all the hard work that is being put in by EU President Jean-Claude Junker, progress on the forthcoming EU budget seems like it might be agonizingly slow. In the first place Blair is in fighting mood:

“The UK rebate will remain. We will not negotiate it away. Period,”

In london the treasury seems equally determined:

“We would use the veto to preserve the rebate whenever necessary,” a Treasury spokesman told AFP. “Our rebate remains fully justified and it is not up for negotiation.”

Meanwhile, over at the European parliament:

MEPs have taken a stand on the future of EU spending as national capitals war over Brussels spending ahead of a June 16 summit of European leaders. The European Parliament has set out budget plans from 2007 to 2013 that are lower than original projections from the EU executive but higher than cost-cutting governments. The parliament backed a blueprint blueprint drawn up by German MEP Reimer B?ge by 426 votes to 140 against, with 122 abstentions. Brussels chief Jos? Manuel Barroso has welcomed the move which is ?150 billion more generous than maximum spends sought by some penny pinching national treasuries. ?The European Parliament has shown leadership and good sense by putting the policy needs of the EU first,? he said.

Europe’s ‘Tiger’

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Last Friday Eurostat released the 2004 data on comparative per capita PPP’s (purchasing power parities) across the EU. Perhaps the most surprising fact which emerges is that Ireland is now in second place (after Luzembourg) with a PPP 40% above the EU average. For a country that not so long ago was considered one of the ‘poorer’ EU members this is truly stunning.

It is generally well known that Ireland had (and continues to have) one of the highest fertility and population growth rates in the EU, but this has not been regarded as especially important since conventional neo-clasical growth theory (and the new ‘super-duper’endogenous growth theory for that matter) argue that increased population means a bigger economy, but not necessarily an increase in per capita income. However, as I said yesterday, it’s all about population structure. What we are now understanding is that the right age structure can produce very rapid increases in per capita income, and Ireland is, of course, a good case in point.

In the case of the ‘Celtic Tiger’, New Economic Paradigm theorists David Bloom and David Canning, who have made a specific study of the Irish case, reached the following conclusions:
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Bolivia In Crisis

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The situation in Bolivia seems to get more complicated by the day.

“Thousands streamed into the Bolivian capital, La Paz, on Tuesday as Indian protests against the ruling elite gained force even after President Carlos Mesa offered his resignation.

The critical highway to the highlands, where the international airport is situated, remained cut off by roadblocks, and the city of one million people was hit by food shortages and a transport strike.

Demanding that the government expropriate foreign energy installations and call new elections, miners in hard hats and indigenous women in derby hats and colorful, multi-layer skirts marched into La Paz in a show of force punctuated by blasts of dynamite that demonstrated the depth of the crisis buffeting the government. ”

Publius Pundit is covering the blogging side. Eduardo Alvarez is giving a good running commentary, Miguel Centellas worries about his mum and other issues from the comparative safety of the United States, and Nick Buxton has photos and good narrative description of the anecdotal details. And a good reflective analysis of what is going on comes from Miguel Buitrago at Mabb.

Update. This seems to be a fairly good summary of where things stand late afternoon CET.