Euro Crisis: After Greece, Italy?

Secret denunciations against anyone who will c...Image via Wikipedia
The G20 meeting in Cannes was rocked by the Greek Prime Minister's antics - first a  referendum on the proposed European bailout then a quick withdrawal. 

But the real concern was Italy. 

Is Italy the equivalent of Lehman Brothers whose failure on 15 September 2008 threatened Wall Street with collapse or is it bigger still, like AIG, "too big to fail"?

Italy is of course much larger than Greece. It is the third economy on the continent after Germany and France. Whether it really is the third in Europe is a matter of debate: there has always been a rivalry between the UK and Italy for that position.  What is certain is that Italy is actually a lot bigger than the official statistics would allow - probably some twenty percent larger because of its "economia sommersa", the hidden part of the economy that escapes all taxation and does not show up in national statistics. 

What it means to have an economia sommersa.

Anyone who lives in Italy (as I do) is instantly aware of the situation when at the restaurant you're asked whether you want a bill ("fattura") or whether the cash ticket (the "scontrino fiscale")  will be enough. With a bill,  the tax (IVA) is fully counted in, with the ticket it's not. In other words, most restaurants never fully pay the government the taxes they owe - just a part of it. And that's only the tip of the iceberg. Tax evasion in Italy is massive and affects just about every economic activity. As it is massive in Greece of course.

And tax evasion is not considered immoral by most Italians. On the contrary. The government is the one viewed as immoral: services are bad, trains are always late, the roads are full of potholes, whole towns in the South go without water in summer, hospitals are overcrowded, the bureaucracy is bloated, slow and inefficient. It is the direct result of clientelismo, the Italian version of pork barrel. Everybody knows that politicians win over votes with lavish distribution of  favors. Careers are made on "raccomandazioni". Meritocracy is not a word in the Italian lexicon.

Berlusconi's empty promises.

When Berlusconi came to power in 1995, he promised reform and never delivered on any of his promises. Yet Italians had hoped to see change: here at last was an entrepreneur, not a professional politician. Here was someone so rich that he wouldn't be open to corruption. 

Unfortunately, that was not counting on the skeletons in his closet: throughout his mandate, the Law has been after him. He's faced charges ranging from tax fraud to sex with an underage prostitute.  Instead of pushing for reforms he has only defended his own interests. As a result, under his stewardship, the situation that was bad got worse.

But then, what could one expect from a leader with such a tarnished profile? Nothing but more and more corruption. The fish always starts rotting from the head. For example, Berlusconi had promised a big infrastructure plan: some 189 projects to overhaul the Italian highway system etc. Out of these, over the last decade, only 40 came to fruition! Berlusconi had made a big fuss of building a bridge over the strait of Messina to link Sicily to the continent, but of course nothing came out of it (and whether such a bridge is at all needed is a good question).

Now Italy is faced with continued slow growth and a locked political situation.

Berlusconi, to save his majority in Parliament, has allowed himself to be highjacked by Bossi, the head of the Lega Nord, the northern secessionist party whose avowed aim is to get Northern Italy to break away from Rome. Not something the Left or the Center relishes, and neither does Napolitano, the Italian President. Meanwhile the public debt has grown to 120% of gross domestic product, some two trillion Euros, threatening the survival of the Euro.

Everybody in Italy knows what the reforms should do: streamline the bureaucracy and get rid of excess fat, liberalize the labor market with a special effort to include new entrants (the young with unemployment nearing 40% are especially affected), introduce measures for growth to cut red tape and support business innovation and entrepreneurship. 

In August the European Central Bank sent Berlusconi a letter detailing all the needed measures, plus an appeal to sell the "crown jewels", i.e. government property to pay for the debt (I'm not sure that's a good idea, but I'll get to that in another post).

The letter went unheeded, Berlusconi didn't even show it to his cabinet.  However a minimal series of "austerity measures" were passed in the summer aiming to balance the budget by 2013 but application has been slow and erratic - except for an immediate rise in the IVA tax (although as we all know this is a widely evaded tax).

Meanwhile rating agencies got in the act and started the process of downgrading Italy's debt ranking (for example, one month ago Fitch downgraded Italy from A+ to A--). And it is becoming increasingly expensive for the Italian government to raise money on the bond markets: the spread with Germany is now averaging over 4 percent - an unsustainable amount.

To prepare for the November G20 meeting, Berlusconi sent a letter of his own to the European Union. It  was accepted probably because there was no time to discuss it. Rejecting it would have made matters worse at the G20 meeting making Europe look like it couldn't handle one of its major members - although nobody was duped. 

Because Berlusconi's letter was remarkably devoid of any real content. Indeed, Tremonti, his own Minister of the Economy, refused to subscribe to it. Just consider one of the points Berlusconi made, that he would see to pension reform and bring the Italian system in line with the rest of Europe - with pensionable age at 67 years for both women and men (something strenuously opposed by the Italian labor unions). Sounds good but the timetable?  It is not planned to be introduced before 2026...that's15 more years of mismanaged and unsustainable expenditures!

So a lot of pointless letter writing is going on and a lot of wrangling.  Including such hot points of contention as a wealth tax (politicians, all very rich thanks to their super salaries, fight it) and a proposed amnesty (condono) on tax evasion. The condono system is well established in Italy and it recurs regularly: rich people who have built "abusive" houses (i.e. without building permit) are very fond of them. And they inevitably cause the Left to rise up in arms.

No wonder the  budget bill presently in the Senate is getting nowhere. Because nobody agrees on the exact content of the reforms or the timetable. Big business is getting increasingly nervous: both Marcegaglia (head of Confindustria) and Montezemolo (Fiat group) have appealed to the government to do something or step down. That's democracy for you.

The way out? 

First get rid of Berlusconi! His reputation is destroyed, the man is finished. But he's desperately holding on to his seat, as is the rest of the Italian Parliament. No one wants to leave a table with so many goodies on it.

Will an Italian politician rise above the corrupt mass? Berlusconi is losing his supporters (another six just left his party) but more, much more needs to be done for Italy to have a new government capable of reforming the system.

I'm not very optimistic.The timetable promises to be a long one - just like in Greece, by the way, if not worse. People expect Berlusconi's government to collapse at year end or January. Then two or three more months will be needed for elections and to get a new government started.

Even if Italy opts for a coalition government Greek-style, times will be long, reforms can never be actuated overnight. Berlusconi has agreed to let the International Monetary Fund monitor the process, but that won't change much of anything and hardly accelerate the process. The IMF can only monitor - not impose anything.

Times in a democracy are very long, and times on financial markets very short. 

Euro zone leaders thought the G20 meeting in Cannes would help them solve their fundamental problem: how to strengthen the EFSF (European Financial Stability Facility) and make it big enough to protect Italy while it took its time to undertake reforms. 

Europe has enough firepower for Greece, but not for Italy. Europeans knew America could not help. They hoped the BRICS would, but they balked. Even China hummed and hawed. From that point of view, the G20 meeting was a total failure.

Bottom line Europe  has to build up its own firepower

That means either strengthen the EFSF or allow the European Central Bank (ECB) to act as a Central Bank. 

The new head of the ECB, the Italian Draghi who (contrary to his predecessor Trichet) is an economist, knows something needs to be done. He immediately moved in the right direction, lowering the interest rate - and managing to do so with the approval of his whole Council, Germany included. 

Because so far, it's Germany that's been dragging its feet: they don't want to hear about Euro bonds or any other mechanism to defend the sovereign debt of Euro zone members. They want Euro members to "put their house in order" first (read: adopt austerity measures). But with too much austerity you kill the hen and you won't get anymore eggs.

The Greek hen is almost killed and the Italian one is badly wounded (not to mention Ireland, Portugal and Spain). 

How much hen killing will it take to convince Germany to adopt mechanisms that truly defend the sovereign debt of members under speculative attacks? 

Additional firepower is needed to give Euro member countries the time to put their house in order. It's as simple as that.

With a caveat: additional firepower should not be used as a pretext to continue playing the game as before, lavishly spreading about unaffordable salaries, pension benefits and other privileges. European countries need to reform, no question about it.

This said, in the end, something will need to be done to avoid the immediate collapse of the Euro. My own favorite means would be Euro-bonds. It's simple, financially elegant and easy to control (say via the ECB).  And it's a means you could fine tune and use as a whip against member countries that do not toe the line - in other words: you could threaten to withhold the Euro-bond cover if they don't reform.

What's yours?

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Euro Crisis: If Greece Exits Europe is it the End of the Euro?

Euro ManImage by rockcohen via Flickr
It looked like the Euro crisis was finally on the mend when Greek Prime Minister Papandreou threw a spanner in the works, on the eve of the G20 meeting. 

His proposal to go to the Greek people with a referendum about the austerity package agreed to by the European Council on 27 October caused a slump in the markets and a political furor across Europe and the world - a collapse of the Euro would impact everyone, the US included. 

Merkel and Sarkozy immediately called Papandreou to order and he dutifully flew to Cannes on the eve of the G20 meeting to explain himself.

There are times when I wonder whether Germany and France are the new Axis of Evil in Europe calling all the shots and trampling on national sovereignty, or whether they are what they pretend to be: the saviors of the Euro?

I prefer to think that Merkel and Sarkozy are convinced Europeans - they certainly look like a minority among politicians in Europe because here in Italy, there is no doubt that Berlusconi hasn't got Europe at heart, nor his own country.  And this no doubt goes a long way to explain Italy's absence from European leadership. If the Euro and Europe are in the hands of Sarkozy and Merkel (and of course the EU's van Rompuy and Barroso), it's because Italy's Prime Minister hasn't paid attention to anything beyond bunga bunga and his own personal interests. 

Now, is Papandreou also a non-European? Not at all. He said to Merkel and Sarkozy just what you'd expect him to say: Greece is a democracy, Greek parties are stuck in an unmanageable opposition. His own party just lost another two members and now he can only count on 151 out of 300 for the vote in Parliament that will take place this coming Friday. 

For him it makes sense to bypass the parties and consult the people. But not for most people around him including his Finance Minister. 

Merkel and Sarkozy did not appreciate either and told him Greece would not see any European money until the situation was cleared up.

Now there are two ways the situation could clear up:

(1) if the Greek Parliament votes yes on the 27 October European help package (they have to do it this coming Friday), then the referendum will take place on 4 or 5 December, asking the people the same question the Parliamentarians answered (i.e. do you accept the proposed austerity measures in exchange for saving Greece from default - actually a 50% "haircut" on Greek debt is already included in said package).

(2) if the Greek Parliament says no, then there's no need for a referendum: the European austerity package is rejected, the  political crisis is opened. Europe will not pay any further money to save Greece from default.  Greece will need to go to early elections to put its house in order (i.e. decides on whether it really wants to apply austerity policies or not).

How early? Even if one rushes things through, you can't expect to hold elections in a democracy in less than two months. That means sometime in January or February 2012. Plus you need the time to re-discuss the European austerity proposals and adopt a policy both at the level of the new Parliament and the new government. In short, nothing can move before March or April, way too late to save Greece financially. 

Snap elections are not the answer. Why add the referendum to the process? It's clearly a non-needed step. But Papandreou probably felt politically fragile. He wanted to get rid once and for all of that social tension that had been building up through the summer.

I'm willing to wager Papandreou didn't expect so many to rebel to the referendum proposal in the Pasok (his own party), including his all powerful Finance Minister. The idea didn't appeal to the man in the street either. Various TV channels interviewing at random people in Athens found that most felt a referendum was too late, that the people should have been consulted earlier in the process.

Now that's a pernicious idea. The idea of consulting people is a recurrent one but, let's face it, so far European construction has NOT been built on a series of referendum (with a few exceptions that were never a success). The process has always been built on existing democratic institutions (i.e. votes in parliaments) and there really is no reason why this should change. Either you believe European member countries have working democracies or you don't... 

Why did austerity packages go down so well in Ireland and Portugal and got stuck in Greece?

Because the opposition in Ireland and Portugal agreed austerity was the way to go. In Greece, the opposition did not. Street protest and strikes were a constant throughout the summer. And small wonder considering the sacrifices that will be demanded (but not yet imposed) - not to mention a soaring level of unemployment, now close to 20 percent. The economy is frozen, exports are down. For a lot of Greeks, the Euro looks like a very bad idea. 

When the government runs out of money at the end of this year and will stop paying its dependents, it will look like a very bad idea indeed. 

Because leaving the Euro and moving to the Drachma is not going to be painless. On the contrary. Banks will fail. People's salaries will go unpaid. Distribution of goods will be disrupted. It will look like World War III.

Is that what the Greeks want?

Yet...From a purely abstract point of view (that's the economist in me speaking) it is very likely that the Euro can easily survive without Greece and Greece can better survive without the Euro: the reborn Drachma would be so cheap that Greek exports would be boosted sky high! 

Withdrawal of the Greek economy from the Euro-zone is not likely to permanently affect the Euro because, put quite simply, it is too small in relation to the whole. It would hurt the Euro no doubt but not kill it.

I know - we are grappling here with the "unthinkable". The Euro wasn't supposed to be something you could get out of at will. It was - as so many commentators repeatedly say - an irrevocable choice

Is the Euro really an irrevocable choice?
Quite frankly, nothing is irrevocable in life, and especially not contracts humans get into.

But the Greeks should keep firmly in mind that the road to the Drachma will be a long and hurtful one. Are they willing to walk down that road?

Are they willing to get out of Europe?

Because that is the exquisitely political - and dramatic - choice they are now facing.

Unless Papandreou withdraws his referendum proposal. I wouldn't be too surprised if he did, though perhaps he can't do it without losing face... 

Post-scriptum: on Thursday 3 November he withdrew it! Not afraid of losing face, it seems...On Friday 4 November he won a vote of confidence from Parliament but the Greek crisis will not go away with political games. Any new government of coalition drawing in the opposition  will still have to deal with the same issue.

All bets are open. What is your opinion?  
Will Greece exit the Euro? 

My opinion is that it won't but do you think I'm too optimistic? Do you think Greece will make the necessary sacrifices, including the necessary reforms, to stay in the Euro-zone?

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Euro-Crisis: An Alice-in-Wonderland Non-Crisis? Not quite...

Merkel-citronpresser               by hoppetossen via Flickr
Last week, it looked like the Euro-crisis was about to be resolved. 

Media hype was high, the European Council, originally scheduled for Sunday October 23 finally met on Wednesday October 26 and by Thursday the markets were ecstatic, happily bounding up. 

By Friday, the euphoria had died down. It had become crystal clear that Italy was the problem. 

Since Italy is not Greece, that was rather bad news. The nearly two trillion Euro Italian debt was bandied about and it sounded like an uncomfortably large amount of money. Plus German Chancellor Merkel, in her inimitable school-marmy style had grimly told everyone that this crisis was going to last a long, long time. And that unless everyone buckled up German-style, the Euro would  not be saved.

We've all heard that before: austerity ja. Follow the German model or die. 

So what's new about the Euro-crisis? 

The efforts of our European political elite, particularly the European Council, have an increasing Alice-in-Wonderland quality: the results of the last European Council looked very much like non-results

Yet those were non-results the markets liked. 

Does that mean investors know something we don't? Does it mean that the Euro crisis is a non-crisis? Yes to the first question and no to the second.

What happened on Wednesday at the European Council was this: in very simple terms, the banks bowed to Mrs. Merkel's (firm) entreaties and agreed to take a 50% haircut voluntarily. Money was set aside by governments to help those banks that might find themselves in difficulty because of said haircut.

The point here is that the agreement is voluntary. This means that an official declaration of default is avoided. Therefore, the insurance systems currently in place that rely on derivatives are NOT triggered into action. That was a huge relief for the markets, because derivatives are so opaque - and possibly so widespread -  that nobody knows what sort of tsunami à la Lehman Bros might occur if an actual default by Greece was announced.

Moreover, for the banks involved (that hold Greek bonds), it's not a bad deal: the markets had valued Greek bonds at 40% of their face value. They're getting 10% more. For sure. That's nice, right, so it's no wonder the markets bounded up for joy.

The euphoria didn't last because the fundamental problems remain unchanged. 

The Euro crisis is unfortunately very real. I've said it many times on this blog: the Euro hobbles along on one leg only (the monetary one). It needs a second leg (the fiscal one) to walk properly.  

That's because the European Central Bank (ECB) is NOT a real central bank. It's not at all like the Federal Reserve. It can't engage in "quantitative easing" or, put more bluntly, it can't print money if that's what's needed to convince the markets that the currency will be defended. 

That's something the ECB won't do. Because that's the way the Germans want it: a Central Bank to fight inflation, not a Central Bank to defend its currency from market attacks.

So what instruments are there to defend the Euro? 

The main one, the European Financial Stability Facility (EFSF) is still sitting at a modest €440 billion - nowhere near the amount needed to save Italy should it go under. At this moment, people are busy in Brussels. All sorts of financial machinations ("special vehicles" and an additional, stronger role for the IMF) are being concocted to try and expand the reach of said Facility. Like for example turning it into an insurer and/or trying to make it palatable to the Chinese. 

Actually other big holders of Euro reserves (of which there are quite a few among the BRICS but also in other countries like Norway or the Gulf States) can be expected to show interest. Nobody really wants to see the Euro go under: that would mean their most lucrative markets would go under too...

And yet, and yet...when all is said and done, as Krugman and Charlemagne (of the Economist) recently pointed out, the Euro crisis would be disarmingly simple to solve. All you have to do is turn the European Central Bank into a real central bank with the ability to print money as needed...

Wonder when that will happen...Any idea?

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Why the Italians Are Not Kicking Out Berlusconi

Silvio BerlusconiThe sneer of the winnerImage by rogimmi via Flickr
How come the Italians are not getting rid of Berlusconi? 

His popularity has sunk to the lowest levels ever, yet he is still up there, strutting about, the bunga bunga party boy! An "international laughing stock", as Ms. Marcegaglia famously called him. Italians are a serious people, how can they stand him?

The short answer is, the average citizen can't stand him but he's paid off enough politicians to stay in. 

The long answer? It's a little more complicated. Italian democracy is dysfunctional. And what has made it unworkable is the new election reform law that did away with the concept of  proportional votes and instituted a winner-takes-all system. The idea was to move Italy towards an American-style two-party system.

What happened instead was that a large number of Italian voters suddenly found themselves kicked out of the system - without anyone representing them in Parliament.

And Parliament? That's where the rub is. Deputies WILL NOT VOTE AGAINST BERLUSCONI because if they do, they lose all their benefits - golden salaries and pension and all the little perks like free cell phones and free train trips and official car etc etc. 

Why? Because pensions et al. are payable to them ONLY if they stay through the whole legislature, i.e. the whole 5 years until the natural end of Berlusconi's government.

Therefore, they'll never vote him out!

Simple. Meanwhile Berlusconi keeps looking after his own interests and waging all his battles against the Italian magistrates who are after him, skirting and avoiding indictments in all sorts of cases, from tax fraud to paying for his Bunga Bunga parties.

The only advantage in all this? None perhaps except that this time Berlusconi might well manage to get through Italian Parliament (and his reluctant ally Bossi, the leader of the Northern league) the major reforms called on by EU partners to save the Euro. 

Like raising the pensionable age to the EU level of 67 years, equal for men and women (not the case in Italy yet, that has the most generous pension system bar none - except for Greece's of course).  A hugely unpopular measure here in Italy where everyone loves their little pensions, including "baby pensions" you can get after working just five years...

So will Berluconi's weakness coupled with Italian's dysfunctional system save the day, allowing for passage of the necessary reforms through Parliament before the next European council meeting (scheduled for Wednesday 26 October)?

My guess is that it will work out. Deputies will prefer to save their skin (and benefits) rather than defend the (indefensible) Italian pension system. But then, I'm an eternal optimist!

Q4U: Do you agree that the main reason Berlusconi is still in power can be ascribed to deputies' desire to save their benefits? Any other reasons in your opinion? What are the chances that Italian democracy will be/can be reformed and made functional?

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Writers' Chat: YA Literature

YA Author Suzy Turner
YA Literature, Why it sells and Where it is Going
YA literature made headlines in 2011 when the children's books critic for the Wall Street Journal, Ms. Gurdon, accused some YA novels for being too violent and inappropriate for a teen market. 

More recently an article in the New York Times suggested that modern YA literature had lost the freshness of Peter Pan and Alice in Wonderland and moved into dark areas. The Harry Potter series was mentioned, referring in particular to Rowling’s “demonders” and her acknowledging that  inspiration for them came from a bout of depression she had suffered.

On the other side of the barrier, the Historian Amanda Foreman, author of  “Georgiana: Duchess of Devonshire,” told a reporter from the NYT (Pamela Paul, August 6, 2010) : “good YA is like good television. There’s a freshness there; it’s engaging. YA authors aren’t writing about middle-aged anomie or disappointed people.”  

Claude Nougat
I met with YA author Suzy Turner to discuss this, and we both felt that the resulting chat could be of interest to both YA readers and authors. The conversation is both here and on her blog

Suzy has just come out with DECEMBER MOON, the second book in her Raven series, and I came out with RECLAIM THE PRESENT, the second book in my Fear of the Past Trilogy.

Our points of views, as you will see, are somewhat divergent because, while we are both into YA literature, we come to it from widely different angles. Suzy is into a fantasy world filled with vampires, changelings and witches, I am into a paranormal world filled with historical characters who are the forebears of my protagonist. My books can be found on the upper right corner of this blog, while Suzy's books are about a young girl who discovers she possesses a unique ability inherited from her unusual family and you’ll find them on her site: http://suzyturner.com 

Claude: What’s your take in this controversy? Do you think YA authors have moved into forbidden territory for young adults – too dark, too forbidding, too violent? I don’t think everyone has, I know I haven’t but then I’m not into Peter Pan/Alice-in-Wonderland stuff either! 

Suzy:  Not at all. if you look back to the kinds of stories that were read to us as children, you'll see that they were just as dark and forbidding if not more so than in many of today's YA books. The Grimms Brothers' stories, for instance, were full of dark, terrifying tales! 

Claude: What I love about YA literature is that it is such a flexible genre: it contains everything from fantasy to paranormal - like both our books - to all sorts of other things, like dystopian fantasy, science fiction, thrillers. Just about anything goes, all genres are mixed and can even be found within a single novel - like mine which combines paranormal with historical elements. Mind you, I spent a lot of time doing historical research and travelling to the places I describe to ensure accuracy! Do you see that as an attractive feature of YA literature? Is that why - or at least one of the reasons - you wrote your book?   

Suzy: Absolutely and I think this is one of the reasons why it is such a popular genre not only for young adults but for older ones too. One of the reasons I wrote my book is because I felt the place in which it was set, had a story to tell. Powell River in British Columbia, Canada, bewitched me into creating a tale of fantasy!  Both of our books have one thing in common though and that is the "search for self" element within. Both of our main characters are trying to discover who they really are, albeit in very different guises. 

Claude: Yes, that’s what I liked about the YA classification: it gave me a chance to explore in depth the "search for self". When you are young, there's so much to learn about the world around you, but particularly about yourself. Tony, my protagonist – a computer whiz kid - is learning about himself in a very peculiar way: through his forebears who come back to him as ghosts, explaining to him what their life was like, what work and love meant to them. Normally that is something you learn from your parents and friends - I thought this was a different way of exploring one's roots. Going deep into the past. Your protagonist learns about herself by travelling abroad, from London to British Columbia and meeting family she didn’t even know she had! Isn’t that right? 

Suzy: Yes, Lilly actually grew up in London stuck in the confines of a tiny apartment, not allowed to go out and have friends, other than the one she secretly had at school. When her parents disappear and she moves to Canada, it is there that she begins to learn more about herself - through the family she never knew existed. In the beginning, she is so naive because she never had the chance to grow. 

Claude: Actually, searching for self is something that concerns us as adults too! We never stop discovering things about ourselves and trying to adjust to new challenges in our lives…Which I suspect is why YA literature has an enduring appeal to all ages! My Fear of the Past Trilogy focuses on the fundamental question: how much of ourselves do we inherit from our family and how much can we call our own? Are we born a virgin slate or do we inherit our character traits from our forebears? Bottom line, is there such a thing as free will?  Is this something your books are also concerned with, and in what way? 

Suzy: That is an interesting question, Claude, and one that is quite difficult to answer. In the beginning, Lilly is quite obviously born a 'virgin slate' until she discovers the truth about herself and then her true self - and her inherited ability - comes out. She really does discover that she is a different person after that moment. The same can be said of December Moon (Lilly's best friend). 

Claude: Overcoming the inheritance from the family can be hard, particularly if it’s a heavy one – like my protagonist who has a family extending back 900 years! But it can happen to anybody who meets the ghosts of his forebears the way he does!  This is why the title of the first book in the trilogy suggests the answer: Forget the Past! Go ahead and live freely, without harking back to it! In the second book, Reclaim the Present, the protagonist has another living-in-the past experience that teaches him that whatever he has inherited from his forebears – even if he’s been dealt the same cards in terms of inherited looks and character – it is up to him how he plays his cards! His life is in his own hands! To sum up, in my opinion, what distinguishes YA novels from other genres are coming-of-age experiences.   

Suzy: Absolutely, but there are also those YA books filled with violence in them, the kind that shocked Ms. Gurdon and probably turns off quite a few parents.   

Claude: Yes, but this is to be expected in a search-for-self kind of literature: not all kids are born with a golden spoon in their mouth! How do you feel about the role of violence in YA novels? Do you think violence should be avoided? Or is there a way to "integrate" it without making it "inappropriate" for teens? 

Suzy: I don't like to read violence just for the sake of it. If it is necessary to push the story forward then that's fine or if the main character needs to learn something through violent elements then okay. I just hate violence for violence sake. Raven, for instance, has little violence. There is talk of death but no gruesome scenes. Its sequel, December Moon, however, focusses more on the vampire characters in the story, some of which are evil, and the only way for them to be stopped is to be killed... so it does contain some pretty frightening scenes! 

Claude: Don’t scare me! Say, like what? Can you give me an idea of what happens in December Moon? I remember that was the name of your protagonist’s best friend back in London, before she moved out to British Columbia… 

Suzy: lol Yes that's right, December is Lilly's best friend and she discovers a family secret too... one which takes her to America, away from her not-so-nice aunt, and back with her mother, not far away from Lilly. That's all I can give away though! 

Claude: Thanks Suzy, I enjoyed the chat! Just to sum up: YA literature’s success seems to be due to its versatility. It’s not stuck in a genre, it’s open to all of them! And that means it’s open to innovation and new themes. And it’s focused on themes that are of continuing interest and relevance to all age groups, not just Young Adults! Those two reasons largely explain its enduring success. Would you say that’s right? 

Suzy: Oh yes absolutely, Claude. Its versatility is one of the defining facts about YA literature that makes it so appealing, not just to read but to write too. I love writing in this genre and I hope to continue to do so for years to come! Thanks for chatting with me Claude... it’s been a blast!

Q4U: Do you agree that "versatility" explains to a large extent the enduring success of fiction for young adults? In your view are other factors at work?

Do you believe that "quest for self" is a defining feature of YA literature? Are there other features that you see as more important? Do you think the trend towards violence and more extremist themes can hurt YA literature's popularity? 

Logo Amazon 
                                       SUZY TURNER     DECEMBER MOON
                                  CLAUDE NOUGAT    RECLAIM THE PRESENT

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One Baker's fight Against Italian Bureaucracy: 4 years to Move to his New Shop!

And he still isn't there! 

The building is finished, but the baker and his wife are still waiting for the "certificato di agibilità" (permission for "access"). It's taken them months to obtain the necessary  certificates and this is the last one they need from the "Comune", the village authorities before they can open their new shop - a bizarre piece of paper that is awaiting somebody's signature, but no one is there in the Comune to sign it. 

They've been waiting for a whole month now for this particular certificate, and when I went there yesterday to buy my bread, they were still waiting...

Let me show you the situation in pictures. Here's one of the several medieval towers on the outside wall that circles Mugnano, a small village of about 1,000 inhabitants in Umbria, the "green heart" of Italy:

Here's the entrance to the baker's shop:

Cute, isn't it? Wait till you see the inside:

Small but lovely, with vaulted ceilings. See the baker's wife laughing? She's always in a good mood when she sells you their goodies. They have no help - this is entirely a family business, and their daughter is studying to become a magistrate...So no one in the family is likely to continue the baking tradition - a pity, because this is one inspired and hugely talented baker and pastry chef! Judge for yourself: 

Looks yummy! And believe me, it is! 

Here's the new building on the outskirts of the village where our baker is supposed to move in. 

It's at a cross-road and therefore should bring him many more clients. In fact he's planning to expand his business and include a coffee shop and pizzeria - both activities that are impossible in the small, cramped quarters he's presently in. 

He's going to move into the left wing of this building:

In the right wing, there will be a small supermarket, and behind, in the background you can see some trees. 

Those trees hide the ruins of a 13th century Benedictine convent. That turned out to be one of the big problems encountered by the builder: because of the ruins, he had to stop his building and redesign it to make it "fit in" as per the rules and regulations of the Italian Belle Arte authorities.

Result, it took him nearly...4 years to complete the building!

Are these ruins something special? Well, you can see for yourself here:

Yes, they are nice, but they are totally abandoned and in dreadful shape.  No one is interested (or has the means) to restore them. Until some ten or fifteen years ago, they were lived in by poor peasant families.So, the last time this place was lived in by monks was a very long time ago...

Were the Italian Belle Arte wrong in imposing a "classic" style to the new building? Probably not, but surely they could have gone about it without wasting so much time. The two are not exactly next to each other, and it seems stretching it a bit to make so many demands on the builder...

I wanted to show you this baker's trials and tribulations because they illustrate perfectly why Italian businesses suffer, why innovation in an ancient country like Italy is so difficult. It is discouraged by a ghastly combination of understandable measures to defend and preserve the invaluable Italian artistic heritage with red tape, corruption and indifference. 

Reams of red tape because Italian bureaucracy has inherited laws and regulations of a vast number of rulers over the centuries, from the ancient Romans to Renaissance princes, from the Austrian and Spanish Empires to Napoleon's France and 19th century liberals.  

Then there's corruption of the direct variety (you have to "grease paws" to move things forward) and indirect variety (if you don't pay, you're left at the bottom of the pile). 

Last but not least, there's a general indifference on the part of civil servants that have conveniently forgotten they are at the service of citizens. Of course not all of them are like that, but too many are.

No wonder Italy is in such a mess!

Q4U: The intent here was to illustrate the damage to business innovation caused by the unholy combination of several factors: (1)bureaucratic red tape, (2) laxity verging on corruption and (3)  rules intended to preserve the cultural heritage. Do you see any other factors at work here?

Have you observed similar situations in the country where you live? Can you report on solutions? 

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Will book publishers be able to maintain primacy as ebook publishers? | The Passive Voice's Fantastic Post!

I love this analysis that Passive Guy - or Passive Voice, I'm not sure which he prefers - has just published and I can't resist giving you the link to his post here: 
Will book publishers be able to maintain primacy as ebook publishers? | The Passive Voice:

Passive Guy argues convincingly that traditional publishers have fallen prey to the well-known shortcomings of monopolists: rigidities, slowness, lack of invention, incapacity to respond to consumer demand. Just like Microsoft, once a highly innovative company that for a while was a near-monopoly in its industry, has become slow and uninventive - stuck in a rut and no longer able to make money outside of its "cash cow", ie the Microsoft Office products.

Faced with competition from Amazon and to a lesser extent from other etailers, chief among them Barnes and Noble, traditional  book publishers - meaning the Big Six - will find it hard or even impossible to maintain their primacy as ebook publishers. That's what both the Passive Voice and the Shatzkin Files maintain, and you better listen to what they say, they're the best bloggers in this area, with illuminating analyses of changes in the publishing industry.

I would just add to everything they've said that in my opinion the single reason Amazon managed to sail ahead of traditional publishers is that IT MAINTAINS RECORDS OF ITS CUSTOMERS. 

Amazon knows what people like to buy and therefore presents them with relevant attractive choices. So they keep buying. 


And that's something traditional publishers can't do. Other things they can't do is run readers community clubs, forum threads of interest to readers to enhance book discovery, reader reviews, likes and tags...All internet-based tricks to enhance book discovery and accessibility.

If Michael Shatzkin is right - see his post here - and the book market is really headed for 80% of total book sales, then traditional publishers are really in...a hole!

The only way to climb out of this hole for book publishers would be to

(1) improve their search for new products (i.e. new authors and books)...Any ideas?

(2) understand better the reader market; so far, they've relied on "genres" to get an idea of how much a book might sell (romance outsells all other genres), but this is hardly an exact science! They need to run book reader surveys and find out exactly what's going on, what people like to read, what they're looking for. And perhaps, but that might be too revolutionary, work some agreement with Amazon to find out what their customers buy so that they can come up with better books more appropriate to reader demand...As a minimum they could analyze the Amazon site and find out what books "other customers have bought": in the aggregate, that would give an indication of people's tastes in books.

Any other suggestions?



The Frankfurt Book Fair with the fair's tower ...  Frankfurt Book Fair Image via Wikipedia
The next big market for e-books? Brazil, India, China? Wrong, it's Europe!

What is rather odd is that all the buzz at the Frankfurt Book Fair is about Brazil and India. Big markets to be sure,and countries that are part of the famous fast growing  BRIC group rocking international trade.

Incidentally, we have to leave China out of the discussion because it is essentially a closed market: they've shut out Google and set up their own Amazon-like etailer. So, although China is potentially the biggest and fastest growing, from a globalized digital book market standpoint, it doesn't count. Not yet and perhaps never.

There are really two facts to keep in mind when analyzing the global book market. One is the number of people who speak and read English. Two, is the degree of alphabetization and education.

On both, continental Europe scores very high, ahead of anyone else in the world. English, we all know, is the language that is most widely spoken around the world, but especially so in Europe. And continental Europe has far more readers than anywhere else, Brazil and India included.

Yet, the European outlook doesn't look rosy. A recent survey commissioned through Rüdiger Wischenbart Content and Consulting, provides a broad picture of emerging e-book markets across Europe, Brazil and China, taking the US and UK markets as benchmarks. Rather than using forecasts, they have examined local factors and the unique defining traits of each market — from market sizes to tax and pricing regimes to cultural choices.

They have been able to document that the breaks to market expansion in Europe include everything from a "supposed tendency" to prefer printed books to "sticky" unfavorable prices.

I'm saying a "supposed tendency" because that is always something invoked at the beginning of e-book penetration in the market - the case in Europe where it is far behind the US. According to the Rudiger survey "in 2015 in Germany, e-book penetration of between 10 and 15% of the book market is conceivable; this number is considerably lower — around 8 to 10% — for Italy or Spain ..."

And e-book prices are "sticky" in the sense that they are not open to free competition. They are constrained by a variety of factors, chief among them legislation that fixes prices for books (for example in France) and  European VAT tax that hits e-books unfairly compared to printed books because they are not considered a "product" but a "license". 

In short, the European institutional environment is not favorable to e-books. But that could change. The European Commission is aware of the VAT problem and has shown signs of a willingness to fix it. Also several  national laws that fix book prices are presently under attack. 

What is more surprising are the breaks to expansion applied by Amazon itself. In America, it has systematically adopted aggressive sales strategies that have effectively promoted and supported its market expansion, chief among them, low-cost e-readers. The Kindle Fire is but the latest example of this policy: the Kindle Fire, unlike other tablets, is very likely to prove a winner against the iPad. 

But, as pointed out by David Gaughran in his excellent analysis of the European market (to read it, click here)Amazon has adopted policies that, if anything, seem to be designed to slow down market expansion...

First, and most disappointing, there's no Kindle Fire available in Europe and it doesn't look like it's coming anytime soon. 

Second, Amazon e-readers are systematically more expensive than in the US, to the point of discouraging potential buyers. Consider this as reported by the Wall Street Journal: " There was more anger from those who went to check Amazon’s European websites. U.K. customers found a new advertisement filling the front page introducing the “all-new Kindle for only £89.00.” This is the lowest-specified model that ships for $79 in the U.S. The U.K. cost includes 20% VAT, so the tax-free price would be £74.17 or around $115. That makes it over 45% more expensive in sterling than in dollars at current exchange rates." (bold highlight added)

But the disappointment with Amazon doesn't stop there. Actually, and from the start,  Kindle books have been systematically more expensive outside the US: Amazon charges $2 to "whispernet" an e-book to a customer (i.e. deliver it via Internet - which of course costs next to nothing). Plus it slaps on a 16% VAT tax because Amazon has elected to be headquartered in Luxembourg. Why go there? The VAT rate is lower there than elsewhere in continental Europe but it's still... 16%! 

As far as I know, its competitors in the US don't do that: it looks like Apple, Sony Store and Barnes and Noble charge the American price to people who live abroad. But I'm not sure and please let me know if you, the owners of iPad, Nook or Kobo, are paying more than 99 cents - the price I set for the first book in my Fear of the Past Trilogy ( I meant that as a "loss leader" - my next books are priced $3.99 in the US market which I feel is more in line with the amount of work I've put into them and with what I believe is their quality)

In any case, the big player in the market is Amazon and if others are charging less, the effect won't be noticeable. And Amazon really seems to be taking its time to enter the European market, perhaps creaming it first...until it actually gets into the market with a Kindle Store!

That's when things start to change. The infamous $2 surcharge has reportedly disappeared from Germany and France the minute Amazon opened its Kindle Store there - yet it's still on in Italy and I believe in Spain too, even though Amazon has just arrived there too.

Why the delays? I have no idea. 

Also, Amazon does very little to support its English-language authors in those newly-opened European markets. For example, you have to set up your author page on Amazon.fr and Amazon.de because it is not automatically transported there by the US-based Amazon.com. These are small things to be sure, but discouraging. 

Also new ideas to spread the market do not seem to be taken into consideration.For example, Amazon could consider setting up cheap translation services for its authors that could be based on the free Google translation function. All that would be needed are a few editors to verify that awkward turns of phrases are taken out and replaced by more appropriate language. That's much faster and cheaper than using a full translation service but no one is offering something like that (either inside of Amazon or out).

What a pity. A globalized market is just out there for the taking! 

If Amazon is too slow, surely that opens the door to others for the taking. It seems that Germans have woken up to the possibility and I've heard there are plenty of German e-book offers outside Amazon and already some German e-readers in the market at very low prices. I haven't seen them and don't know how good they are but if you have, please let me know.

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