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Surprise: Germany Leads!

By Shlomo Maital

source: IMF

Quiz: Which country in the world is highly conservative fiscally, avoids deficits like the plague (oops, sorry for that one), hassles spendthrift EU nations (like Greece) for excess debt, and in general has acted like Scrooge?

     You got it. Germany.

   Part two: Which country has seen the extent of the COVID-19 plague clearest and acted most decisively, including massive emergency spending?

       Surprise. Germany. Never would have guessed it.

Lame duck Chancellor Angela Merkel, a trained scientist, trained well in the former East Germany, was among the first to predict massive deaths, and drew scorn at the time – but she is proving right, even though Germany, for many reasons, has the lowest relative death toll (relative to the number of cases).

   And now, she has led Germany to implement the most extensive, massive emergency bailout plan including huge spending, covering salaries of employers and guaranteeing emergency loans for businesses. No other country comes close. (Alas, my own country is right there at the bottom – though, of course, we do not have as deep pockets as Germany does).

   According to the International Monetary Fund, Germany’s bailout package is fully 28% of GDP! And Germany guarantees 90% of emergency loans. All this, to keep businesses afloat, so they can bounce back.

   But I have on caveat, or quibble. Germany: all this largesse goes to Germans. How about Italians and Spaniards? Can you spare just a small slice of your luscious pie for fellow EU countries, suffering badly?   They’re waiting.

European (Dis)Union: Shame on Them!

By Shlomo Maital

    Italy is desperate. With more COVID-19 cases and deaths than China, it is now ‘triaging’ (selecting) those who get medical care and not treating those 60 years old and over. Don’t blame them – they have to, they lack medical equipment and doctors and hospital beds and ventilators.

   Wait. Italy is part of the “European Union”, a union of 27 nations banding together to help one another and support one another.


   Apparently, wrong.   The nation coming to Italy’s rescue is not the other 26 EU nations, but Russia, which has sent medical supplies and personnel.

   (And by the way, United States? Which used to help other nations? Not in the age of Trump… America First!)

   Slovakia’s leader noted that his desperate requests for help from the EU were turned down cold. But China did come to the rescue, and it is China which is now sending medical aid to other nations. The press claims it is done to restore China’s image, badly damaged by the fact that COVID-19 originated in China. Maybe, too, it is done because China simply gets it.

   European Union? It was not Brexit and Britain that has damaged European union, but the Europeans themselves. Whatever happens in this crisis, Europe will not be the same. If nations in a union do not help one another in time of need, then there is no union.

   Shame on you, Europe.  I can’t believe that none of the other 26 EU nations can spare any medical supplies or equipment, at all.  Nor is there a single EU person in charge of EU overall policy. 

It will be very hard for the Europeans to put Humpty together again, after pushing him off the wall and not even offering a bandage.



Dealing with the Trump Presidency: a Survival Guide for 4 to 8 Years

By Shlomo Maital


OK, so counting four years from Jan. 20, or possibly eight – how do we survive?

Mark Blyth, a political science professor at Brown University, has some sage advice, published in the Washington Post.

   The basic problem: In democracy, we vote for what we want. And increasingly, Blyth notes, we are simply NOT getting it.

“Unsurprisingly, people are beginning to realize that they are no longer getting what they vote for. Instead, they are being asked to pay more and more for what they already receive through taxes, taken from stagnant or declining incomes, which also must service their debts. In such a world it’s great to be a creditor and lousy to be a debtor. The problem for democracy is that most people are debtors. In such a creditor-friendly world, however, democracy is reduced knowing that the menu of policy will never vary. Trump’s win in the Midwest, British voters deciding to leave the European Union, Italy’s referendum and Greece’s revolt against its creditors are all connected in this way.”

     In short: Most of us owe money. A few OWN money. The system has been rigged in their favor. And it may stay that way under Trump, the billionaire.

     So how do we respond? Blyth observes:

     “At the end of the day, when you no longer get what you vote for and when the role of voting is reduced to affirming the status quo, voters will vote for the most undemocratic of options if that is all that is “off the menu.” That’s democracy in action in a world devoid of choice. When you can’t get what you want and most people do not benefit from the economic outcomes of government, it’s also what makes democracy unstable.”

       Americans voted “off the menu” (a minority of them, true) because that was the only choice ‘off the menu’.   And it has made democracy unstable, and is doing so all over the Western democracies.

       We’ll survive this. Take a deep breath. Take a long view.  Watch how the brilliant, wise American Constitution protects its citizens from scoundrels. At some point, centrist politicians will begin to understand that voters want real change, want to unrig the system to help debtors not creditors, and want actions, not promises. It may take a few more ringing defeats, like Trump, Brexit, and Italy to wake these politicians up.

       For four years, or eight years, Americans must say clearly what they want, and vote that ticket in every election. Mid-term elections are only two years away.   How will Trump supporters vote, when they feel they are again, not getting what they want?

Matteo Renzi Revives Italy

By Shlomo Maital

  Italy consumer confidence

    The attention of the business press has been almost entirely focused on the bad-news story of Greece.  While Greece suffers, almost un-noticed   Italian Prime Minister Matteo Renzi, who took over in 2014, has fulfilled his promise to revive the Italian economy.  He has cut public spending, slashed deficits, modernized the judicial system, and reformed the sluggish labor market. (All these reforms are equally vital in France – but Hollande is neither able nor willing to undertake any of them). 

      Renzi’s Jobs Act, passed March 1, ends the system that gave some employees ‘jobs for life’.   Companies that hire a previously unemployed worker in 2015 get a three-year grace period on social security contributions. This makes hiring much more worthwhile.   As a result,  consumer confidence in Italy is now, July 2015, at a 10 year high (the graph does not include the latest few months). 

      Car sales are up.  Youth unemployment is way down.  Demand for exports is strong.  And debt payments are falling sharply, from the present high level of 5 per cent of GDP to a targeted 1 per cent by 2020. 

     Renzi’s reforms now enable insurance companies and securitization companies to lend directly to businesses,  attracted by a tax break for firms that issue new equity.

      Renzi has cut corporate taxes by 6.5 billion euros, and imposed electoral reform for Italy’s lower house.  He is trying to slash the amount of pending litigation by half and reduce the length of trials from three years to one.

     Renzi is only 40 years old.  When appointed, he was 39, making him the youngest Prime Minister in Italy since 1861.   His reforms deserve far more attention.   (See The Financialist:  Italy’s Reform Agenda).   Few believed he could fulfill his promises when he took office. But he has.  Perhaps France could take a few lessons from Renzi. 

Blog entries written by Prof. Shlomo Maital

Shlomo Maital