Things fall apart in Italy, and not just the economy

By Jamie Dettmer - Thursday, October 25, 2012 at 5:00 AM - 0 Comments

Alessandra Benedetti/Corbis

“What’s going to be left of Italy?” Priti Suri pondered as she joined a throng of tourists crowding one of Rome’s iconic monuments, the Colosseum, where stone fell from a wall in just the latest of many such incidents in recent years. Dodging re-enactors dressed as ancient Roman centurions and flitting past families haggling with street vendors over the price of plastic gladiator helmets and “I Love Rome” T-shirts, the Indian lawyer peered up at scaffolding erected around a chunk of this imposing amphitheatre in preparation for urgent repair work. “I love history, and walking around Rome. I’m glad they’ve started to save the Colosseum—but what will happen to other monuments?” she asks.

As Italy retrenches in the face of the euro crisis, state authorities have economized on the budget devoted to preserving the nation’s heritage. The culture budget has been halved in the past six years; cracks are now literally showing in monuments across the country. Venice has long been sinking, of course, but now sites such as Pompeii and the Colosseum and buildings such as Florence’s Duomo are in troubling disrepair, with masonry regularly crashing down. The latest alarm came earlier this month when two massive chunks of marble fell from the facade of the Royal Palace of Caserta, near Naples. A testimony to Bourbon extravagance, the 1,200-room palace has long been a favourite location for Hollywood producers, standing in for the Vatican in the thriller Angels and Demons and appearing in Mission Impossible III and Star Wars Episode I: The Phantom Menace. Last week, the tumbling masonry narrowly missed a family of day trippers. Alarmed curators say they need at least $9 million just to repair the iron clamps holding the eye-catching marble in front of the enormous building. “We are worried because the pieces that broke off come from areas restored just 30 years ago,” says curator Paola Raffaella David.

She isn’t the only curator concerned about what permanent damage will be wrought once the country has finished with public spending cuts and austerity—whenever that may be. In June, authorities had to rope off Rome’s baroque masterpiece, the Trevi Fountain, a backdrop movie buffs will recall from Federico Fellini’s La Dolce Vita, after chunks of stone and stucco fell from ornate reliefs. Workmen had to remove other fragile parts of the cornice from the monument commissioned by Pope Clement XII in 1732 depicting Neptune in a chariot being pulled by two horses. “I suppose if you don’t have the money, there’s nothing much you can do,” sighed retired salesman George Baker as he threw a coin into the fountain. “I don’t want to sound hard-hearted but maybe they should have been a bit more careful with their money,” says the silver-haired native of Charlotte, N.C. “It is all a matter of priorities, isn’t it?”

As far as Italy’s Green Party is concerned, the Trevi Fountain is a priority. It has launched a campaign against “dangerous cuts” to the preservation funding of Rome’s monuments, with party president Angelo Bonelli asking Romans to “tip us off to sites that are not being taken care of.” Highlighting the neglect of the city’s architectural treasures, he listed other endangered Roman sites—such as the Domus Aurea from Nero’s palace, which has been closed to visitors since a roof collapsed. This summer, restoration work started on the Colosseum, thanks only to the intervention of the millionaire owner of the Italian shoemaker Tod’s.

Italy boasts more UNESCO World Heritage sites than any other country, in a time of austerity that’s a financial burden almost too great to bear. Pompeii has lost both a gladiators’ barracks and the House of Chaste Lovers, which was only excavated 25 years ago. Both collapsed from modern neglect after having survived the Vesuvius explosion of 79 A.D.

Cultural advocates say that Italy’s preservation budget should be protected from cuts, arguing that culture is a core business for a country that sees about eight per cent of its GDP generated from tourism. While monuments in Rome may yet be saved, those in more rural sites are unlikely to be so fortunate. In March, the poor state of an open-air, Etruscan-era theatre in northern Lazio was highlighted by an investigative television show, Striscia la Notizia. One of the presenters remarked as the camera panned over a riot of weeds: “The ancient Romans would have put on plays here: comedies, tragedies. The tragedy today is the state of this archaeological site.”

Cuts protests paralyze Greek courts, hospitals

By The Associated Press - Monday, September 17, 2012 at 4:28 AM - 0 Comments

ATHENS, Greece – Judges and hospital doctors in Greece have begun what they intend to be lengthy protests against planned austerity measures, the most serious confrontation between unions and government since a three-party coalition was formed three months ago.

Starting Monday and for the next two weeks, judges are only handling cases considered to be emergencies, in response to expected salary cuts.

State hospital doctors also started an indefinite protest, treating emergency cases only, over unpaid overtime pay. They joined private doctors who earlier this month began refusing to treat state-insured patients without full payment.

The government is trying to finalize an €11.5 billion ($15 billion) austerity package required for continued emergency rescue loans. Unions are angry at the new cuts and have called a general strike for Sept. 26.

German court rejects calls to block permanent EU rescue fund

By The Associated Press - Wednesday, September 12, 2012 at 5:25 AM - 0 Comments

KARLSRUHE, Germany – Germany’s high court on Wednesday rejected calls to block the Europe’s permanent rescue fund, paving the way in a much-anticipated ruling for its ratification by the country’s president.

Investors breathed a sigh of relief that Germany’s highest court was not putting up a roadblock in a central part of Europe’s efforts to contain its near three year debt crisis. Stocks across Europe rallied strongly, the euro spiked to a four-month high of $1.2897 and the borrowing rates of troubled economies, such as Spain and Italy, eased further too.

Opponents had challenged Germany’s ratification of the European Stability Mechanism — a new, permanent €500 billion ($638.8 billion) bailout fund for the 17 countries that use the euro — arguing that it violated the country’s constitution. They had sought an injunction preventing the country’s president from signing the legislation into law.

Germany’s ratification of the ESM is key, because the fund cannot work without the country’s participation. Germany, as Europe’s biggest economy, is the number one contributor the fund.

The taxpayer-backed fund is crucial to the eurozone’s debt crisis resolution efforts because it can loan money to governments that can’t borrow otherwise, and markets had been nervously awaiting the ruling.

Federal constitutional Court Chief Justice Andreas Vosskuhle said the case posed “special challenges” — not just because of the political significance of the ESM, but because the financial and political consequences of a possible delay were “almost impossible to estimate reliably.”

But, he said, the court’s “examination showed that the law with high probability does not violate the constitution.”

Still, he said Germany must get legal guarantees before ratification that the provisions of the ESM can’t be interpreted in such a way that Germany’s financial liability could be increased without the approval of Berlin.

Germany must also ensure that provisions in the ESM treaty demanding “professional secrecy” from fund employees don’t stand in the way of the German Parliament being informed in full about fund decisions.

Germany is liable for about 27 per cent — about €190 billion — to the overall European bailout scheme of €700 billion, which includes the ESM and remaining money from the current temporary fund, the European Financial Stability Facility.

It was not immediately clear when the President Joachim Gauck would be able to sign the measure, which was already approved by Parliament.

Chancellor Angela Merkel was due to address lawmakers later Wednesday.

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David Rising and Geir Moulson contributed from Berlin.

German high court rejects call to postpone decision on European bailout measures

By The Associated Press - Tuesday, September 11, 2012 at 3:42 AM - 0 Comments

BERLIN – Germany’s high court on Tuesday rejected a last-minute plea to postpone its ruling on a request to block the country’s approval of the eurozone’s permanent bailout fund.

The complaint was brought by Peter Gauweiler, a backbench lawmaker with Chancellor Angela Merkel’s conservative bloc and a consistent opponent of the government’s euro rescue strategy, after the European Central Bank last week unveiled a new program to buy government bonds.

Gauweiler is already one of several plaintiffs against the €500 billion ($640 billion) European Stability Mechanism. Germany’s Federal constitutional Court is to rule Wednesday on calls for an injunction.

Gauweiler and others argue the ESM violate Germany’s constitution.

In requesting that the court postpone its decision in the ESM case, Gauweiler argued the ECB’s bond-buying decision “created a completely new situation” regarding whether the fund was constitutional.

He argued that the prospect of the ECB buying bonds makes the overall risk for the German budget “completely incalculable” and that the bank’s potential actions would override Parliament’s rights to supervise the fund.

But the Federal constitutional Court said in a short statement that it would go ahead with its scheduled ruling. The court’s decision on the injunction is widely anticipated as a harbinger of how it might rule on the constitutionality of the ESM overall.

Eurozone’s record unemployment shows tough task ahead for leaders

By The Associated Press - Friday, August 31, 2012 at 4:43 AM - 0 Comments

BRUSSELS—Official figures show that the unemployment rate across the 17 countries that use the euro remained at a record high of 11.3 per cent in July, the same as in June but up 1.2 points from a year earlier.

The data published Friday by the European Union’s statistical agency, Eurostat, show the financial crisis continues to hurt the economy, with the jobless rate continuing to creep higher to record levels in Spain and Greece.

Even though the eurozone’s overall percentage remained stable, Eurostat said some 88,000 more people were without a job in July, for a total of 18 million.

The 11.3 per cent unemployment rate is the highest since the euro was formed in 1999.

Has Greece run out of time and money?

By Colin Campbell - Monday, July 23, 2012 at 11:16 AM - 0 Comments

Germany tells Greece to stop asking for help

By macleans.ca - Sunday, June 24, 2012 at 9:25 AM - 0 Comments

Help yourselves, German Finance Minister Wolfgang Schaeuble told Greece today in the pages of Bild am Sonntag.

Or at least that was the gist. “The ball is now in Greece’s court,” he said. “It’s in their hands to win back the confidence of the people of Europe. They’re only going to accomplish that with concrete actions and deeds.”

Schaeuble advised Antonis Samaras, the new prime minister of Greece, to expedite reforms in his country.

As Reuters reports, Greece wants a two-year extension to the 2014 deadline for it to cut its budget deficit to 2.1 percent of national economic output, from 9.3 per cent in 2011.

In other headlines today, news that Samaras will not be able to travel to the EU summit Brussels later this week. The new leader underwent surgery Saturday for a detached retina.

Ireland holds referendum on EU fiscal compact

By Alex Ballingall - Thursday, May 31, 2012 at 12:02 PM - 0 Comments

Ireland is voting on whether to ratify the EU’s fiscal compact that sets strict limits on budget deficits for member nations. If rejected, the debt-beleaguered country will be denied further bailout money after its current tranche runs out in 2013.

Ireland is the only country in the EU holding a referendum on the pact. But since only 12 of 17 eurozone members need to ratify it, an Irish rejection won’t sink the entire agreement. It has already been accepted by all EU members except Britain and the Czech Republic.

Those against the treaty in Ireland argue that austerity is dragging Europe into economic recession, and that the country should instead default on its debt. Last year, Irelands ran a 13.1 per cent deficit. The treaty commits countries to holding their deficits to under 0.5 per cent of total economic output.

Prime Minister Enda Kenny urged Irish voters to support the pact in a televised address. ”I ask you to make a further contribution by coming out to vote ‘Yes’ on Thursday. Yes to stability. Yes to investment. Yes to recovery. Yes to a working Ireland,” he said, quoted by the BBC.

As voters took the polls in Ireland, concern over the eurozone continued to affect markets around the world. In Canada, the loonie took a 0.60 cent dive on Wednesday to close at 97.16 cents US. The euro dropped below $1.24 US for the first time since 2010.

For investors, one of the biggest concerns in the eurozone is Spain, a country with soaring borrowing costs and a troubled banking sector. “They have to do something to put a ring around their banks,” Chris Kuflik, investment adviser at ScotiaMcLeod in Montreal, told the CBC. ”There has to be some form of a resolution and the difficulty is, you have so many different agendas from so many different nations.”

Bond auctions calm euro zone fears after Dutch government collapse

By Alex Ballingall - Tuesday, April 24, 2012 at 10:02 AM - 0 Comments

Better-than-expected government bond auctions in Europe are providing some comfort to those worried about a resurgent euro zone debt crisis after the Dutch government collapsed in the face of austerity talks this week.

Successful auctions were reported Tuesday in the Netherlands, Spain and Italy, sending the countries’ bond yields on an overall downward trajectory. According to the Financial Times, the Netherlands sold 1 billion euros in notes maturing in 2014 at yields of 0.523 per cent, while Italy auctioned off 2.5 billion euros of 2014 debt at 3.35 per cent. For its part, Spain sold 1.9 billion euros of three month and six month bills.

“This is a good result in the circumstances. It looked bad yesterday but they managed to sell this in a couple of minutes,” an Amsterdam-based bond trader who declined to be named told Reuters.

Despite the good news, Société Générale analysts are warning that the collapse of the Dutch government led by Prime Minister Mark Rutte could lead to a credit rating downgrade, and have dire consequences for the monetary union:

The political vacuum left by Rutte’s cabinet and the sombre IMF analysis of the country’s public finances, mean that a downgrade is more likely than not by the time the next government is sworn in. . . There are [also] wider implications in that it shows how the battle over fiscal control and the implementation of austerity has intensified.

Moody’s downgrade of six EU countries goes unnoticed

By Gustavo Vieira - Tuesday, February 14, 2012 at 11:26 AM - 0 Comments

In normal circumstances, if a major credit rating firm like Moody’s downgraded six European Union countries in a row, that would likely set markets tumblings all over the world. That would be especially true if notice of the downgrades included warnings about top-rated Britain, France and Austria. But that is not what’s happening just one day after Moody’s adjusted the sovereign debt ratings of Italy, Portugal, Spain, Malta, Slovenia and Slovakia downward, and warned that it could remove the triple-A rating from the UK, France and Austria soon. The Moody’s downgrade on Monday night did not shake markets that were otherwise buoyed by news that Greek lawmakers had approved a package of austerity measures, paving the way for a $172 billion (U.S.) bailout.

EU leaders aim for ‘fiscal compact’

By Alex Ballingall - Monday, January 30, 2012 at 10:45 AM - 0 Comments

The politics of budgetary control are slowing negotiations between Greece and its international creditors aimed at getting the next chunk of bailout cash into the beleaguered Mediterranean country’s hands. Greek Finance Minister Evangelos Venizelos “angrily rejected” a German proposal to implement European oversight of Greece’s budgetary decision-making, according to the Financial Times. The proposal would allow the EU overseer to veto Greek tax and spending decisions, effectively giving the country’s creditors budgetary control. Venizelos was offended by the implication that his country would have to choose between “national dignity” and financial aid.

The tiff over fiscal sovereignty is the latest in the seemingly never-ending effort to avoid a Greek debt default. Greek bond holders are being pressured to give up profits on their investments, while the EU and IMF are asking for deeper austerity measures in return for their bailout cash.

“If the process is not completed successfully, we will be faced with the spectre of bankruptcy that would have great consequences for society, and especially for the poor,” Lucas Papademos, the Greek prime minister said.

But as the wrangling over the Greek bailout continues, a summit of euro zone countries is kicking off in Brussels, where member nations are discussing the creation of a “fiscal compact” that will coordinate spending policies among the countries using the common currency. Worries over the downside of austerity—that too much spending cuts can derail the possibility of economic growth—are fueling a vision of “smart” budget discipline for the euro zone.

These worries are especially relevant for countries like Spain, which has an unemployment rate of 22.8 per cent, the highest in the European Union. Alarmingly, more than half of Spanish youth — aged 16 to 24 — are jobless. Cuts to social programs that support such people could foster widespread anger and instability, which would deter investment and perpetuate economic stagnation.

Financial Times

BBC News

BBC News

Merkel under siege

By Michael Petrou - Tuesday, October 4, 2011 at 9:50 AM - 0 Comments

Eric Herchaft/Redux

Spare a sympathetic thought for German Chancellor Angela Merkel, leader of the most powerful country in the euro zone, and the one whose decisions will have a consequential effect not just on citizens of Germany, but the rest of the continent. “When Angela Merkel goes into a room at a summit meeting, it’s as if the headmistress has arrived,” says William Paterson, honorary professor of German and European politics at Aston University in Britain.

This is all well and good when the school—or a monetary union of 17 member states and 300 million people—is running well. But when half the students are wasting or hiding their lunch money, the teachers are overspending and asking the headmistress to cover for them, and—to stretch the metaphor—the headmistress’s own family doesn’t see why she should do so, it becomes a much more trying job.

This is roughly the position in which Merkel finds herself as the popularity of her Christian Democratic Union (CDU) party crumbles, and the governing coalition it leads shows signs of imploding. The eurozone is facing a financial crisis, driven by soaring sovereign debts of member states such as Greece, Portugal, Italy, Ireland and Spain. Greece’s situation is the most serious, with some observers predicting that a default on its debts is inevitable. Such an event would hurt all the economies in the union (not sparing those outside it) and dramatically weaken the euro. And so, multi-billion-dollar bailout packages have been pledged, with more on the way.

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Merkel hopes to ease investor worries over Euro debt crisis

By macleans.ca - Tuesday, September 13, 2011 at 11:19 AM - 0 Comments

German Chancellor Angela Merkel worked to assuage worries over a Greek debt default on Tuesday as the euro zone debt crisis continues to fuel market volatility. Investor confidence took a hit when Italy was forced to pay its highest yield to sell 5-year government bonds since adopting the euro in 1999. The possibility of a Greek default is raising concerns over the health of larger euro zone economies, such as Spain and Italy. Speaking with the media, Merkel called the challenge “historic,” saying that if Greece were to default on its debt, “we would see domino effects very quickly.” She also urged European policymakers to choose words carefully to avoid further propagating investor fears. Meanwhile, U.S. President Barack Obama told a group of Spanish journalists that European leaders must show the political will to confront the debt crisis in order to stabilize the markets. American Treasury Secretary Timothy Geithner, in an unprecedented move, will attend a meeting of EU finance ministers in Poland later this week. Greece has indicated that it will run out of money in October, and needs the next 8 billion euro tranche of bailout money to pay for pensions and wages.

Reuters

Room among the ruins

By Patricia Treble - Thursday, June 10, 2010 at 10:40 AM - 0 Comments

DIMITAR DILKOFF / AFP / Getty Images

Rioters rampaging through the streets of Athens, combined with tales of corruption and economic collapse, have emptied Greece’s beaches and tavernas just as the crucial summer tourist season begins. More than 27,000 hotel bookings were cancelled in Athens in the two weeks after demonstrations turned deadly in early May. And sales of holiday packages to Germans and Britons, who account for a third of the Mediterranean nation’s tourist market, have plunged by at least 25 per cent.

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