EUCOM Economic Analysis - Part I

[Firn]

Fuchs post pretty muchs mirrors the situation in Italy. In general, based on observation and rather solid facts like the saving rate and personal debt the Italians tend to behave in a similar way when it comes to enduring/durable goods. We just manage the res publica much worse.

A big difference is the amount an Italian spends on food - then again we have good reasons for it. First it costs more in then in German stores and second it is very difficult to find another Western country in which you get such an excellent ROI on "eating out". This naturally drives demand.

P.S: Spending on durable goods has dropped in Italy a great deal since the depression started. The car market which is on level last seen sixty years ago is just the most visible sign. All in all it is a great time to buy a car if you have the money and need one.

[Surferbeetle]

Gentlemen,

The Last Harvest, from cornfield to new town, by Witold Rybczynski (NYT Review at http://www.nytimes.com/2007/07/29/bo...w/Green-t.html ), is a pretty interesting window into real estate in the US.

A credit history is a big deal in the US where 'easy credit' is commonly used/culturally acceptable for things such as purchasing gas, computers, washing machines, cars, houses, property, and small businesses (Credit Bureaus by Wiki, http://en.wikipedia.org/wiki/Credit_...#United_States

Household Life Cycles and Lifestyles in the United States, REX Y. DU and WAGNER A. KAMAKURA, Journal of Marketing Research Vol. XLIII (February 2006), 121–132, http://faculty.fuqua.duke.edu/~kamak...Lifestyles.pdf

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Gauck unterzeichnet ESM-Gesetz und Fiskalpakt, 13.09.2012, FAZ, http://www.faz.net/aktuell/wirtschaf...-11889456.html

Einen Tag nach der Entscheidung des Bundesverfassungsgerichts hat Bundesprsident Joachim Gauck die Gesetze zum Euro-Rettungsschirm ESM und zum Fiskalpakt unterzeichnet. Rechtliche Folgen hat das zunchst allerdings nicht.

Coalitiemeter: welke coalities zijn mogelijk?, NRC Handelsblad, http://www.nrc.nl/apps/coalitiemeter/

Kies de partijen die je wel en niet terug wil zien in de nieuwe coalitie. Je ziet dan direct welke coalities op basis van de laatste peilingen een meerderheid kunnen vormen.

De coaltiemeter probeert coalities te maken met zo min mogelijk partijen die gezamelijk een meerderheid vormen, waarbij elke partij noodzakelijk is om die meerderheid te vormen.

Schaeuble Cautions Spain Against Aid Bid in Poke at France, By Rainer Buergin and Brian Parkin - Sep 13, 2012 10:03 AM MT, Bloomberg News, http://www.bloomberg.com/news/2012-0...at-france.html

German Finance Minister Wolfgang Schaeuble discouraged Spain from seeking a full international bailout, saying another request for outside aid risked a fresh round of financial-market turmoil.

“I’m not in the camp that says ‘take the money,’” Schaeuble said in an interview in Berlin today when asked about French moves to press Spanish Prime Minister Mariano Rajoy’s government to ask for more aid. Spain “would be daft” to ask for a bailout on top of the 100 billion euros ($129 billion) for its banks if it didn’t need it.

[Fuchs]

Originally Posted by Firn

The car market which is on level last seen sixty years ago is just the most visible sign. All in all it is a great time to buy a car if you have the money and need one.

The automotive sector is a tricky one.
Cars are not being used up to their full life expectancy in Europe.

A well-designed (not intentionally degraded by developers) new car can last for decades. Mercedes Benz E-class Taxi cabs regularly drive 300,000 km in few years without killing an critical parts such as the engine or transmission terminally.
Corrosion has been under control for two decades; the stuff that corrodes to the point of requiring a spare part or to the point of making the chassis unsafe - that's corroding by design. Some developers (even at good brands) sabotage their own design to ensure there will be demand for new cars in the future.

Cars could be durable enough for 30 years of service to a family. This may happen if the cartel of degrading the corrosion-resistance will be broken.
The consequences on the macroeconomic scale and on lifestyle as well as on the automotive sector (after market and custom upgrades could become the new big thing) would be huge. Cars could become an investment for the retirement comparable to houses.

[Firn]

I wrote already about the lack of Italian productivity growth. Now it has been picked up as page 1 topic by the Corriere della Sera

Dalla produttivit ai salari
Rapporto sul declino italiano: Rapporto sul declino italiano

Nella classifica delle maggiori economie mondiali il sistema nazionale scivolato all'ultimo posto

ROMA - Eravamo i primi, siamo diventati gli ultimi. Negli anni Settanta l'Italia era al primo posto per crescita della produttivit nell'industria rispetto ai principali Paesi nostri concorrenti nel mondo. Negli anni Duemila chiudiamo la classifica. Nel decennio 1970-1979 l'output per ora lavorata (valore aggiunto al costo dei fattori) del settore manifatturiero era cresciuto in Italia in media del 6,5% l'anno. Meglio del Giappone (5,4%), dell'Olanda (5,2%), della Francia e della Germania (intorno al 4%) e molto meglio dei padroni del mondo, gli Stati Uniti (2,7%), e della culla della rivoluzione industriale, il Regno Unito (2,4%). Negli anni Ottanta gli inglesi erano per balzati al primo posto (sar stata la cura Thatcher?) con una crescita della produttivit del 4,4%, l'anno mentre l'Italia era scivolata in coda, dimezzando il ritmo precedente (dal 6,5% al 3,2%). Negli anni Novanta la leadership fu conquistata dagli Stati Uniti, grazie soprattutto alle innovazioni tecnologiche e informatiche (4,3% l'anno) e l'Italia rallent ancora (2,6%). Ma nel primo decennio del Duemila, cio dopo l'introduzione dell'euro, che la produttivit nel nostro Paese precipita a un misero 0,4% in media d'anno, contro l'1,8% della Germania, il 2,5% della Francia, il 2,8% dell'Olanda, il 3% del Regno Unito. E meglio di noi ha fatto anche la Spagna (1,5%). Bastano questi dati a illustrare la centralit del problema della produttivit in Italia.

Nothing new there. Same old story and now without the option to Lira our way out. Monti has been unable, mostly due to very strong resistence to reform the labour market. Something correlated:

This graphic (page 2) shows in the average yearly unit labour costs growth in the last decade. The gap between Germany and the other big EU countries (sorry Poland) is just shockingly large, especially if you discount the estimates of 2011 and 2012. (Greece for example would have +2.5 instead of +1.5 % per year).

[davidbfpo]

A wide ranging commentary and I liked this passage for showing the complexities:

The international press has been quick to link the unprecedented pro-independence success of the rally in Barcelona and the surge in secessionist feeling in polls in Catalonia (support for independence seems to be consistently above the 50% threshold for the first time) to the dire economic situation in Spain. Analysts have been puzzled by the fact that this arrives at the same time that the regional authorities in Barcelona, facing the impossibility of the markets financing its soaring debt (the largest both in total and in per capita terms amongst Spanish regions) - have requested a bailout from the Spanish government. Catalan nationalists argue that Catalonia has consistently been transferring a disproportionate amount of its wealth to poorer Spanish regions – the current Catalan government estimates transfers amount to 8% of regional GDP – and complain about the irony that Catalonia may now be subject to additional conditionality in order to receive Madrid’s bailout. The absence of standard official statistics about interregional transfers (deemed too politically sensitive to publish by the Spanish Government in recent years) makes the debate one of faith and a matter of choice about which figures to believe: different economists and studies come to wildly diverging, even contradictory conclusions.

Link:http://www.opendemocracy.net/jordi-v...rch-for-future

[Firn]

In Italy there has been also a controversial debate about the federalismo and the role of the state and the regions in general which has been fueled by recent scandals like this and the staggering differences in the handling of the public good. It is strange that some regions like la Lombardia are able to work better with far less expenses per capita then others.

An element of this debate has been the complex confronation between the autonomous regions/provinces and other regions with the government trying to tax as much as it can and to safe quite a bit by cutting some expense by reducing for example the number of normal provinces. Now the autonomous regions are also not created alike and have various statuti and range from the in general virtuosi northern ones - Aosta, Trentino-Southtyrol, Friuli-Venezia Giulia - to the southern Sicily and Sardinia.

In generally in the first three have put their greater means and rights to good use, although the public sector of the Vall d'Aosta seems far to big while in the latter, especially Sicily this has not been the case. The current "spending review" has put alot of pressure especially on the wealthier ones to "do their part". This has caused of course anger especially when there has been little regard to hard-won rights at least based in one case on an international treaty. Not su much pacta sunt servanda for Monti in these times of expediency. A tendency which can be seen to a good degree in the whole Eurozone with the orginal Barbarians seemingly being by far more Latin in this sense then the so-called Latins.

Finishing with o tempora o mores might be a little much. So I will just add that due to the decline of the Lega Nord and the relative small size of those autonomous regions the impact on Italy as a whole should be smaller then in Spain.

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P.S: I have slightly reduced the strong investments in stocks due to the very strong gains in the last weeks. European stocks are IMHO still more under-then overvalued but short-term gains of 10-20% are nothing to be sneezed at especially if the economy is still so weak in many areas and the dividends have been mostly payed out. I'm thus both long on them while preparing myself to use another crisis phase to get in. If he latter is not possible I might look at decent bonds. On the other hand I did something which I usually don't do, buying while I'm selling, in this case an ETF on Chinese small caps. After a good deal of information I have very little trust indeed in the level of Chinese accounting or reporting etc but even with a good margin of safety built in they seem to be attractive for the long term, but who knows what the future brings.

P.P.S: For the Italian speakers out there. Love also the comment, which sadly speaks the truth.

Villa abusiva? Ma come si fa: - a costruire una villa (NB non una tettoia per polli: una villa) abusivamente? - come si fa a costruirla di fronte al mare, dove tutti (tutti!) la possono vedere? - come si fa a non accorgersi di camion, gru, operai, allacciamenti alla conrrente ecc? - come si fa a costruirla in un parco? Ma, scusate: in che paese viviamo? Comune, Provincia, regione, Vigili...: nessuno controlla ????

[Surferbeetle]

http://www.casareal.es/ES/Paginas/home.aspx

El Rey, a los independentistas: “Lo peor ahora sería perseguir quimeras”, MÁBEL GALAZ / CARLOS E. CUÉ Madrid 19 SEP 2012 - 00:50 CET, El Pais, http://politica.elpais.com/politica/...06_782001.html

Durante 34 años de democracia, y con la clarísima excepción del golpe de Estado del 23-F, donde su protagonismo fue absoluto, el Rey ha evitado entrar directamente, al menos en público, en los asuntos políticos más relevantes de España. Sin embargo, y en una situación especialmente compleja de crisis económica y política, el jefe del Estado decidió ayer dar un giro a esa línea de perfil bajo y entró de lleno en el asunto más relevante y delicado de la política española, el desafío independentista en Cataluña, con una declaración en la que todo era inédito: la claridad de los mensajes, el formato —un texto en la renovada página web de la Casa del Rey— y sobre todo, el contenido.

Don Juan Carlos, cuya política de comunicación ha dado un giro total desde la crisis de imagen que sufrió con su polémico viaje a Botsuana para cazar elefantes, lanzó un mensaje clarísimo, preparado en La Zarzuela, pero autorizado expresamente por Mariano Rajoy. Y ese texto, claramente político, iba dirigido muy directamente a los independentistas catalanes, que la semana pasada protagonizaron la gran manifestación de la Diada en Barcelona. “En estas circunstancias”, escribe el Rey, “lo peor que podemos hacer es dividir fuerzas, alentar disensiones, perseguir quimeras, ahondar heridas. No son estos tiempos buenos para escudriñar en las esencias ni para debatir si son galgos o podencos quienes amenazan nuestro modelo de convivencia. Son, por el contrario, los más adecuados para la acción decidida y conjunta de la sociedad en defensa del modelo democrático y social que entre todos hemos elegido”.

Ese mensaje sobre “perseguir quimeras”, una clara referencia al independentismo, y “discutir si son galgos o podencos”, fue precisamente lo más comentado ayer en los pasillos del Congreso y en general en la política española. La decisión de emitir un mensaje tan contundente causó un enorme impacto y muchas críticas, aunque la mayoría, salvo las de los nacionalistas, llegaban en privado. Mientras en el PP había una evidente satisfacción, ya que el mensaje era sobre la necesidad de pensar en la crisis económica y olvidarse de los debates secesionistas, el PSOE mantuvo formalmente su tradicional respeto al Rey, pero sin ocultar un malestar de fondo. Muchos diputados consideraban ayer que este mensaje puede ser contraproducente en Cataluña, donde el ambiente es de gran tensión política a la espera de lo que suceda mañana en la reunión en La Moncloa entre Rajoy, que sigue sin decir una palabra sobre el asunto desde la manifestación de Barcelona, y Artur Mas, el presidente de la Generalitat.

Spanish transition to democracy, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Spanish...n_to_democracy

MONCLOA PACTS OF 1977, http://www.eurofound.europa.eu/emire...SOF1977-ES.htm

Agreements reached in October 1977 between the Spanish Government and delegates of the most representative political parties to set the basic shape of economic and social policy during political transition. They established the framework of policy on pay, employment and social security during the early years of the democratic regime. They are seen as democratic Spain's first social contract or tripartite agreement.

_______________________

Euro financials score card:

Two wins, one loss for the August - September time frame....sold on the news of Draghi's OMT and just before Karlsruhe's ruling on the ESM. One more arrow in the quiver...probably should have sold on helicopter Ben's QE3 news last Friday, but will probably wait until this Friday...Japan's printing news has not made for much of a bounce

[Firn]

It would be quite interesting to know more about the internal transfer mechanisms in Spain. I'm quite informed about those in Italy, Germany, the UK and the USA but lack even basic information about the Spanish system. In general the topic can be quite complex, especially for regions with a high degree of autonomy. More autonomy in general means that the region has to have more ressources (read money) at its disposal to fund those additional needs in autonomous sectors like education.

Found now a little, quite an interesting read.

[Fuchs]

AFAIK the Spanish state keeps the exact figures of the transfers a secret itself in order to avoid discussions about the transfers.

[Firn]

My youngest brother enjoyed his Erasmus year in Spain a great deal as Andalusia is beautiful even if very hot in the summer and surprisingly cold inside in wintertime due to a frequent lack of central heating. The rent was payed in black (at least one says so in Italian) and there was an amazing number of local people, especially young people living without regular job, most even without a "regular" black one. The number of high-quality musicians was very high indeed and greatly impressed him, who is quite a talented singer and musician himself. They generally also had more time to excercise then the guy finishing his engineering degree in Munich.

The local dialect is strong and he learned it rather quickly as he lived mostly among the locals. Surprisingly, although it really shouldn't be there were a couple of stereotypes about other Spanish regions and among them the arrogant and know-it-better Catalans. It is of course amusing to observe that the world is a village in this regard both also in Italy with the terroni ( those south Italians ) and polentoni ( I love a good polenta) and the Eurozone as a whole.

[Lewis341]

It is estimated that Poland's total applications for Euro 2012 added up to more than 5 percent of its gross domestic products. Many Polish corporations are now investing just enough to keep enterprises going, but they are holding off on making big-ticket investments in substructure, development or employment.

[Surferbeetle]

Una teora de la clase poltica espaola
, CSAR MOLINAS 10 SEP 2012 - 01:34 CET, El Pais, http://politica.elpais.com/politica/...85_745267.html

En este artculo propongo una teora de la clase poltica espaola para argumentar la necesidad imperiosa y urgente de cambiar nuestro sistema electoral para adoptar un sistema mayoritario. La teora se refiere al comportamiento de un colectivo y, por tanto, no admite interpretaciones en trminos de comportamientos individuales. Por qu una teora? Por dos razones. En primer lugar porque una teora, si es buena, permite conectar sucesos aparentemente inconexos y explicar sucesos aparentemente inexplicables. Es decir, dar sentido a cosas que antes no lo tenan. Y, en segundo lugar, porque de una buena teora pueden extraerse predicciones tiles sobre lo que ocurrir en el futuro. Empezando por lo primero, una buena teora de la clase poltica espaola debera explicar, por lo menos, los siguientes puntos:

1. Cmo es posible que, tras cinco aos de iniciada la crisis, ningn partido poltico tenga un diagnstico coherente de lo que le est pasando a Espaa?
   
2. Cmo es posible que ningn partido poltico tenga una estrategia o un plan a largo plazo creble para sacar a Espaa de la crisis? Cmo es posible que la clase poltica espaola parezca genticamente incapaz de planificar?
   
3. Cmo es posible que la clase poltica espaola sea incapaz de ser ejemplar? Cmo es posible que nadie-salvo el Rey y por motivos propios- haya pedido disculpas?
   
4. Cmo es posible que la estrategia de futuro ms obvia para Espaa -la mejora de la educacin, el fomento de la innovacin, el desarrollo y el emprendimiento y el apoyo a la investigacin- sea no ya ignorada, sino masacrada con recortes por los partidos polticos mayoritarios?

__________________

A European policy outlook: the crisis and beyond, LSE, http://www2.lse.ac.uk/newsAndMedia/v...r.aspx?id=1564

Speaker(s): Pierre Moscovici
Chair: Peter Sutherland

Recorded on 17 September 2012 in Old Theatre, Old Building.

Pierre Moscovici will address both the policy outlook in France and the ongoing crisis management developments at the European level. Pierre Moscovici was appointed Minister of the Economy and Finance on 16 May 2012, following the election of President Franois Hollande. He has been involved in European and international affairs as well as in national politics, in particular on fiscal issues. He was first a member of the European Parliament from 1994 to 1997, and became one of its vice-presidents from 2004 to 2007. In the meantime, he was elected to France's National Assembly in 1997 (and was later re-elected in 2007 and 2012), in the constituency of Doubs in eastern France, and was appointed Minister for European Affairs in the government of Lionel Jospin from 1997 to 2002, where he was specifically involved in finalizing the Amsterdam Treaty in 1997 and negotiating the Nice Treaty in 2000. He was also involved in negotiating the European Constitutional Treaty of 2004 and was a vigorous advocate of its adoption in France. Before holding elected office, he worked for the French Socialist Party, which he joined back in 1984 as an expert on fiscal issues. Pierre Moscovici joined the Audit Court (Cour des Comptes) after graduating from the Ecole Nationale dAdministration (ENA) in 1984.

__________________


Porsche, Daimler Indicate Europes Car Crisis Spreading
By Alex Webb, Dorothee Tschampa and Tommaso Ebhardt - Sep 21, 2012 5:44 AM MT, Bloomberg News, http://www.bloomberg.com/news/2012-0...spreading.html

Daimler AG (DAI) and Porsche AG provided evidence that the worst European car market in 17 years has started to spread to the luxury brands, mirroring a broader recession that has spilled from southern Europe to Germany.

European car sales dropped 8.5 percent in August, the steepest decline since February, the Brussels-based ACEA industry association said on Sept. 18. The group forecasts that European deliveries will hit a 17-year low in 2012. German car registrations fell 4.7 percent in August, pushing the eight- month sales figure to a 0.6 percent decline.

The regions volume carmakers, hit hardest by the European markets downward spiral, are taking even tougher measures. Peugeot agreed yesterday to sell a majority stake in its trucking unit to raise cash. Fiats volume brands are eliminating 20 percent of management jobs in Europe, according to a person familiar with the matter.

[davidbfpo]

An article from the FT, prior to the launch of a report next week by Counterpoint, a London-based European think tank and sub-titled:

Reluctant radicals’ make up the majority of Europe’s rightwing populist voters. But there are ways to win them back

Link:http://www.ft.com/cms/s/2/667b08a6-0...#axzz27C8yOh3f

It opens with:

There is a story about Europe that says we are living in a rerun of the 1930s. According to this narrative, the populist right is rising again as crisis-hit Europeans look for scapegoats. Indeed, rightwing populist parties have polled more than or near one-fifth of the vote during the crisis in countries as tranquil as Finland and Switzerland. Already the populists are poisoning political debate, by pushing mainstream parties to take far-right paranoid, xenophobic views seriously. Now they aim to graduate to government.

But perhaps we worry too much. A fascinating new report by Counterpoint, the London-based research and advisory group, provides an unhysterical analysis of rightwing populism in Europe today. Merging recent data on voting in France, Finland and the Netherlands with previous surveys from around Europe, Counterpoint identifies who is voting for these parties and why. The report helps us see what strategies the populist right will use to grow – and what strategies we can use to counter them.

[Fuchs]

The U.S. brands of right wing extremism are something that's likely more troublesome in the long term than whatever sugar high the European right wing(s) might get from the economic troubles.
Luckily, Americans have troubles crossing the English Channel language-wise.

Another long term problem with right wing ideology stuff might stem from Russia, Belarus and the Ukraine. Nationalism and jingoism appear to be part of what fills the void left by communism in those countries. This could turn ugly sooner or later (even more so in East Asia, where the Chinese, Koreans and Japanese have some outright ridiculous nationalistic ideas).

The only area in Europe where the economic crisis could give a decisive push to nationalism is in my opinion Catalonia.

[Firn]

Catalonia warns EU that million-strong march cannot be ignored

We had this discussion before and for the first time I have seen numbers for this wealth transfer:

Mas has threatened to call elections if that is done in Catalonia, believing it would provoke a wave of nationalist sentiment. Catalans pay between € 12bn and € 16bn more in taxes each year to Madrid than they receive back, with the excess going to poorer regions such as Andalusia and Extremadura.

For 7.2 millions this means roughly 2000 € per capita.

"I identify with the popular outcry," he said, adding that only his responsibilities as regional prime minister had prevented him from joining the demonstrators. "Catalonia needs a state," he added. "For years we thought it could be the Spanish state."

But just as northern Europe was getting fed up with the south, and vice versa, so Catalonia and the rest of Spain were now fed up with one another, Mas said.

He implied that one way for Rajoy to dampen the surge in separatist feeling would be to agree to a change in funding, allowing Spain's wealthiest region to hold on to more of the tax it generates.

Catalonia wants to be able to collect its own taxes and send a share to Madrid, rather than the other way around. That would make it different from most of Spain's other 16 regional government, but similar to the northern Basque country.

Mas will see Rajoy next week to discuss what he called an issue of "fiscal sovereignty". Popular outrage at Catalan money going elsewhere amid health and education cuts was fuelling the thirst for independence, he suggested.

Italy has very distinct regions with greatly differing languages and dialects but nothing like this heavy-weight.

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The Shiller P/E or P/E 10 is rather low for most European countries with some exceptions like Germany, where stock prices have been resisted and current PE is relative low due to strong earnings. The Dividend yield is high and for rougly 3 years now superior to the bond yields, for the first time in almost 50 years. The ROE is in general good despite some relative poor earnings. In this case the Eurozone crisis has been good for investors has it has enabled us to buy a seemingly good prices for quite some periods. While I'm firmly long with a roughly 65% in equity, nominally with good capital gains I have sold quite a bit in the recent weeks. Sadly yesterday I was not able to do so, but who knows where and when...

Considering that I'm a net saver and should remain so for a couple of years those low valuations are positive. Even more so is volative nature of the stock market which allows one to buy cheap and sell some high if one wants to. Certainly Mr. Market has been very helpful lately, giving in my opion sometimes a good margin of safety. I just hope that by generally sticking to my sweet spots and rules I did not comit too many blunders. Recounting the ones made in the last 6 months is already quite a bit painful

Instead of thinking of the current crisis why not enjoy some of the best qualities of good old Europe? Schubert, Trio op. 100 - Andante con moto .

P.S: I can not resist to write that accroding to a study presented in the Corriere della Sera the Italian savers got slightly less the half of the overall yield of their investments. More then 50% went to "helpers" as Buffet calls them, in very costly fees. This is nothing but shocking and a good reminder why I have pushed hard to get the personal as low as possible. Low-cost index funds (ETFs etc) are part of this package. Sadly selling expensive products can be a good deal of the bank who enables the helpers to get enough money to help the bank to help the saver paying them in generally far too much for the performance they offer.

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[Fuchs]

Catalans pay between € 12bn and € 16bn more in taxes each year to Madrid than they receive back, with the excess going to poorer regions such as Andalusia and Extremadura.

This does not fit together. Lots of central state expenses don't go to regions, such as military, border control etc.

Besides; all those figures that float around are unofficial, unconfirmed.

[Firn]

Originally Posted by Fuchs

This does not fit together. Lots of central state expenses don't go to regions, such as military, border control etc.

Besides; all those figures that float around are unofficial, unconfirmed.

Well spotted - add another one to those blunders. Thinking more does sometimes help. I also did not openly express doubt about the numbers which I should have.

[davidbfpo]

An article on Portugal, a country that rarely appears in the UK press, which indicates:

The people have finally realised that the troika-imposed austerity is not working in Portugal.

As youth can sometimes be mobilised, this is significant:

unemployment is close to 16% of the population (youth unemployment is estimated by analysts to be as high as 40%.....

There is a 'safety valve':

..the young and talented have decided to follow the advice of the Prime Minister and are now leaving the country in droves.

Link:http://www.opendemocracy.net/eunice-...l-plays-truant

[Firn]

Wie eine Waehrungsunion Italiens Sueden verarmen liess

Erst mit einiger Versptung merkten die Zeitgenossen, wie sehr die Whrungsunion den wirtschaftlich schwcheren Regionen zu schaffen machte. Ihre Ausfuhren gingen um 16 Prozent zurck. Manufakturen mussten schlieen, im Binnenmarkt wuchs der Exportberschuss des reichen Nordens. Investitionen blieben aus, weil die wohlhabenden Schichten lieber die als sicher geltenden Staatsanleihen des neuen Whrungsraums kauften. Es half nichts, dass eine rigorose Sparpolitik die anfngliche Schuldenkrise bald berwand und sogar zu einem ausgeglichenen Haushalt fhrte: Die Art, wie diese Austerittspolitik ins Werk gesetzt wurde, vergrerte die Kluft weiter.

So war es, nachdem die Italiener vor 150 Jahren ihren Nationalstaat grndeten, aus so gegenstzlichen Teilen wie dem liberalen Piemont und dem feudalistischen Knigreich beider Sizilien. Bis heute vereint das Land die konomischen Extreme Europas innerhalb der eigenen Grenzen. Im Sden lag die Jugendarbeitslosigkeit schon vor der Krise bei 50 Prozent, in einigen Regionen des Nordens herrschte hingegen stets Vollbeschftigung. Die Frage ist, was sich aus diesem Europa im Kleinen fr das groe Ganze lernen lsst.

This actually very informative article does illuminate some of the Italian issues and their origins for German readers. Not that their are well-known to an even small number of Italians. The Banca d'Italia has a lot of quaderni, basically papers, on the storia economica d'Italia. They do a good job at explaining the historical economic development of this country.

Convergence among Italian Regions, 1861-2011

Abstract

In 150 years, the trends in regional disparities in economic development within Italy have differed depending on whether they are gauged by longitude or by latitude. The disparities between western and eastern regions first widened and then closed; the North-South gap, by contrast, remains the main open problem in the national history of Italy.

This work focuses on the underlying causes of the turning points in regional disparities since national unification in 1861. The first came in the late nineteenth and early twentieth century, with the industrialization of the so-called industrial triangle. This was followed by the failed new turn during the interwar years: not only were the beginnings of convergence blocked but the North-South gap, until then still natural, inevitable, was transformed into a fracture of exceptional dimensions. The second turning point, in the twenty years after the World War, produced the first substantial, lasting convergence between southern and northern Italy, powered by rising productivity and structural change in the South. The last turning point was in the mid-1970s, when convergence was abruptly halted and a protracted period of immobility in the disparity began.

JEL Classification: N63, N93, R11, R12
Keywords: Italy, regional disparities

Authors: Giovanni Iuzzolino * , Guido Pellegrini** , Gianfranco Viesti***

I will comment on it when I have more time.

[Fuchs]

I thought about writing an article for my blog about this kind of problem, but so far refrained for lack of connection to the usual blog topics.


European unity had to turn from a realist policy strategy to an ideology in order to succeed on the grand scale. The pro-Europe ideologues (including Kohl) looked at the commonality that a common currency provides and mistook it for unity.

A currency union does not unite; it divides. Existing imbalances are likely to increase with a common currency, and the utterly incompetent behaviour of naive investors and governments has amplified this effect.

Now we're in great trouble, for the ideology drove us into a wrong turn and walking back is not allowed to ideologues.

The challenge will be to break the ideology without breaking the real advantages of the degree of unity and cooperation so far achieved in Europe.