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1.07.2012

Italy, the Land of Wine is Turning to Beer!

Beer drinking started growing in Italy fifteen years ago and now it is fast becoming a fad. In that time, over three hundred microbreweries were started. According to a recent study, their number stood at 397 in 2011 and rising. None of them suffered from the 2008 recession. 

While fast rising, this is still a small sector: it amounts to a modest 1.5% of total production and sells only in specialized beer pubs and a few restaurants -- and not in any supermarkets like industrial beers. 


For example, in Rome, in the old part of town, you can go to a beer pub - the Open Baladin -  that serves 40 different craft beers on tap, all of them Italian. They have an on-going "Winter Beer Fest" and I thought I'd try them out for lunch. I started walking from the Isola Tiberina. Here is a view of the island:


A view from the south-east on the Tiber Island.Isola Tiberina, Image via Wikipedia


I crossed the bridge on the right of this photo, coming across a tramp with his dogs who was beatifically soaking up the winter sun, he with his four dogs:




After five minutes walking towards Piazza Campo dei Fiori, I came to Via dei Specchi, an old narrow street along which the beer pub is nestled, barely visible on the left:




Here's the entrance to the beer pub:



Rather modest with its brown doors, but inviting. I walked in - it was 1:15 pm - and found a big almost empty room with a wall of beer bottles that looked almost like wine bottles! And across it, a long bar lined up with forty taps to draw craft beers:




I sat in a corner and ordered a scrumptious warm bread sandwich filled with melting Mozzarella di Bufala (the best kind) and smoked ham. Then, following the advice of the serving girl (very nice and helpful),  I selected among the 40 beers on tap, "My Antonia". It turned out to be an interesting variation on a pils imperial with 7.5% graduation: strong body, very aromatic, long in the mouth. All beers, regardless of the choice, cost €5, a very reasonable price for a tall glass, (31cl):




Then I had an incredibly good piece of pastry, dark chocolate and nuts, as light as a mousse - a real surprise for a beer place - but that is presumably the Italian touch!




By the time I left, at 2 pm the place was jammed:




Given the late hour for lunch and the way people talked loudly, gesturing with gusto, you could tell there were no tourists here: this was an Italian crowd! 


Italians quaffind down beer? Yes, surprising for a country that is culturally devoted to wine, and the biggest wine producer in the world right after France and the first in terms of per capita consumption of wine: 54 liters/year, ahead of France (47 liters) and much more than the US (7 liters). 

While most Italian micro brewers copy English and Belgian beers, some of them are quite innovative, using local herbs and spices as well as experimenting with wine mixtures (!). There are reportedly over a thousand different brands of craft beer producted in Italy. I can't tell you how good most of them are, but they are bound to be different and they certainly express a renewed interest in beer.

I say a "renewed" interest because Italians are not new to beer drinking. The Ancient Romans used to drink it and even had their own pub, the "Domus Cervisiae", opened by the Roman governor of Britain. 


Beer was drunk in the Florence of Lawrence the Magnificent in the 1400s and regarded as a refined drink. Industrial beer-making flourished in the 19th century, reaching a high point in 1894 with 191 breweries. However, by 1930, there remained only 35, largely as a result of a campaign of taxation aimed at discouraging beer drinking which killed off the smaller breweries. 


By 1960, only three groups (Peroni, Forst and Pedavena) remained that accounted for 60% of all beer production. Now, most of these groups have been absorbed by multinationals (Heineken, Peroni Sab Miller and Carlsberg). The remaining industrial Italian breweries, accounting for less than 10 percent are just four: Forst Menabrea, Birra Castello, Tarricone and Theressianer. The rest, some 25%, is imported by Imbev.

While the Italian per capita consumption of beer remains statistically modest (31 liters in 2007) at about half the EU average and well behind world champions like Ireland (155 liters) and Germany (119 liters), it has been steadily rising (it was some 24 liters in 1990) while wine consumption has declined ( from over 60 liters/year in 1990 to some 42 liters now).

The reasons for this rise?  The micro breweries of course have played a large role in raising interest. And so have the big industrial breweries, introducing a large variety of beers. Indeed, they consider the Italian market as "mature". And beer festivals are organized just like in Germany, including an Italian Octoberfest that you can enjoy even in the South (in Naples for example).

Of course most of the small breweries are found in Northern Italy but they are now expanding in the South and in the islands, Sicily and especially Sardinia (where per capita beer consumption is the highest in Italy: 60 liter/year). If you come to Italy for a vacation, don't think you need to give up your beer drinking. You can even organize picturesque tours from one brewery to the next in Tyrol and elsewhere (for itineraries and news about beer festivals, check this site).

The Italian enthusiasm for beer has led to some interesting research results showing that beer like wine, if drunk in moderate quantities, can reduce the risk of cardiovascular disease. That is the claim of one recent study published online in the European Journal of Epidemiology. And it certainly looks like a serious study: funded by the Giovanni Paolo II Foundation (Vatican-related!), and carried out in its laboratories in Campo Basso, Italy. A meta-statistic analysis aggregating the results of recent scientific studies around the world, it pools together the data of 200,000 persons for whom alcoholic drinking habits were associated with cardiovascular disease (see article below). With that much data on hand, who can resist the lure of beer drinking?

Prosit! Or perhaps I should say, Italian-style, salute, to your health!
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1.02.2012

Lessons Learned in 2011 and What They Can Tell us About 2012

Arab Spring [LP]Arab Spring Image by Painted Tapes via Flickr


Events in 2011 taught us some lessons about the fragility of democracy, the limits of nuclear power and the incapacity of the political class to manage a modern state. Let me elaborate a little before drawing conclusions about 2012:


1. The Fragility of Democracry, starting with the Arab Spring and ending with Occupy Wall Street: The Arab Spring was the first major event in 2011 followed by a series of protest movements in Europe and the US (fueled by the "Indignados" in Spain and Occupy Wall Street in the US). The role of the Internet, particularly Facebook and Twitter, was hyped up and seemed to herald a new age for human rights and democratic freedom, particularly in the Middle East that had been singularly bereft of them up to that point. More generally it pointed to an awakening of the middle class around the globe as it realized at last that with unbridled capitalism, an explosion in income inequality had relegated it to the 99 percent. The young failing to find employment, even those with university training, lost all hope of matching their elders' income and maintaining their living standards.


The final results of these protest movements are not in yet, but it is already clear in the Middle East that only two countries so far have "made it": Tunisia and Morocco. Strengthened forms of democratic government have arisen there while in the other countries of the region the process still has to play out, with Yemen still suffering from troubles and Syria apparently sinking in civil war. 


In Lybia fresh out of its civil war, it is too soon to tell  but it is obvious that the road to democracy will be long, arduous and uphill. The first priority for any Libyan government will be to disarm the rebels and pacify the country. The next priority will be to find a political consensus between the various ethnic groups and tribes that make up the country, and here too, Sharia may prove a more powerful unifying force than any desire for a liberal Western-style democracy. Too much religion is not good for democracy...  


Egypt, the country furthest along in the democratization process after Tunisia, is now threatened by an increase in Islamization and a military unwilling to give up the power it has held for some seventy years. Indeed, Egypt is a particularly worrisome case, as  the Muslim Brotherhood has gained some 40% in the on-going election process and the more extremist Salafi movement is up to an astonishing 25%. That means liberal forces have the rest, a very modest 35%, not enough to prevent the establishment of a Sharia-governed state and society.


In the early days of the Arab Spring, much was made of the "Turkish model" as an example of a Muslim country capable of running a full and free democracy.  Now no one mentions it anymore and it is probably just as well since even Turkey is experiencing problems: Erdogan's government is pushing towards Islamization (for example the debate around women's head scarves) and keeps a very large number of journalists in prison on trumped up charges.


Protests in the rest of the world have similarly failed in achieving any concrete results. China has moved quickly to quell them.  At the time of writing, protest is washing over Russia where people got angry when the recent elections were visibly skewed to support Putin's United Russia party. But the protest is unlikely to succeed anytime soon as Putin, predictably, reacted negatively, viewing protesters as having "no leaders and no goals" - exactly what critics in the United States have said of the Occupy Wall Street movement.



Tangible results so far are nil. Clearly democracy is fragile and difficult to bring about in places where people have been used to dictatorial governments. And let's face it:  democracy is not doing very well even in Europe. Apart from the well-known shortcomings in countries like Russia, Ukraine and Belarus, we are now experiencing the surprising spectacle of Hungary, in the very heart of Europe, slowly but surely moving towards an autocratic system: Victor Orban's government has already muzzled the press and moved to take control of the Hungarian Central Bank, denying it the independence that is essential for a central bank to function properly. 


Moreover, the democratic system weakens a country's ability to govern, in particular its foreign policy whenever an election is on the horizon: politicians worry more about scurrying around for votes than about managing the state. In 2012, this is going to be the case for several countries including France but most importantly for the United States, still the prime player among nations. Well, don't expect the US to play much in 2012!


2. The Limits of Nuclear Power: How can we ever forget the Fukushima drama? Many countries drew lessons immediately, prime among them Germany that gave up its nuclear program and turned resolutely to green energies. 


But Germany's example hasn't been followed - least of all by France that continues to bet on nuclear power - not surprising given its investment in it (read: Areva). Oddly enough, Japan itself is vacillating and clearly hasn't decided yet on its course of action - though it's likely to continue to cling to nuclear power as the more economic solution. These hesitations are echoed at the ground level in Japan where the villages hit by the tsunami still haven't decided to move uphill and appear to stay put in their original site in spite of the obvious dangers.


The upshot? Nuclear power is going to cost more but it won't fade away in spite of all the dangers...


3. The Incapacity of the Political Class to Manage a Modern State. This is perhaps the most surprising lesson of 2011. For the first time it has become crystal clear to everyone that the political class tends to fall into its political games rather than pay attention to governing the state - admittedly a very difficult proposition for politicians who are generally untrained as managers and are only good at public speaking and shaking hands. The modern state is highly complex and subject to a variety of economic pressures and social challenges - none of which politicians are prepared for. Indeed, they are never voted in for their capacity to manage the state. They get votes for their pleasant look and attractive demeanour. 


The case of Belgium that went nearly two years without a government underlines how useless the political class really is. It showed that a modern state can perfectly well be run by its bureaucracy. It really only needs a government to handle foreign affairs - not particularly a pressing issue for Belgium that has its foreign policy embedded in the European Union. 


When the Euro crisis took a bad turn for Greece and Italy, both countries ditched their politicians and resorted to technocrats to resolve their problems. Does this mean the technocrats are not democratically legitimate? No, because in each case, these technocratic governments obtained a vote of confidence from their respective parliaments.  How well they will manage the crisis has yet to be seen, but one thing is certain: for the first time, politicians have accepted to let people savvier than themselves run the state. There is little doubt that a failure of Monti in Italy and Papademos in Greece will signal the end of the Euro. If they can't do it, no one can.


There were many other major events in 2011, chief among them the Euro crisis, but I've picked out those who seemed most promising in heralding change. 


Will 2012 be the year that democracy and human rights win in the Middle East? That nuclear power is reined in within the limits of prudence and reason? That the political class recognizes its managerial limitations and allows technocrats to be in charge of crisis management? 



What's your take? Do you think we will apply the lesson learned in 2012? 

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12.24.2011

Happy Holidays!

English: Jesus Christ - detail from Deesis mos...Image via Wikipedia
Happy Holidays to all! And wishing you every success in 2012!


I love this picture: it's a detail from Deesis Mosaic, Hagia Sophia, Istanbul, Turkey.

The East is not as far away from the West as you might think!

Here's to peace on Earth!



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12.13.2011

Euro Crisis: The Real Players Are Not Those You might Think

Coat of arms of the Weimar Republic (1928-1933...Image via Wikipedia

The media would like us to believe that the Euro-zone is in the hands of Germany. After the Euro Summit of 8 and 9 December it certainly looked like it. 

Frau Merkel succeeded in  imposing her rules of the game to the whole of Europe: strict fiscal discipline and austerity. Growth that had been a French and Italian concern was firmly put on the back burner. Even firewalls to defend Euro-government in distress (including 200 billions to the IMF) have taken second place: none are at a level sufficient to defend a big economy like Italy's and they won't become operational for many more months, perhaps (in the case of the Stability Mechanism) next July at the earliest...

Still, there was a moment of enthusiasm. The media made a show of the 26 countries pulling together around Merkel's cure for the Euro while the 27th member of the Union - the UK - opted out with a flourish. Cameron claimed he vetoed Merkel's proposed amendments to the European Treaties to "protect the interests of the City" (which accounts for 10% of UK's national product).

The British bulldog is out of the European ring. The British media (see the UK Guardian article below) trumpeted that Britain can provide an "escape route" from the Euro that is collapsing, and thus "build a Europe outside the Euro". Conservatives crowed welcoming Cameron as their new hero. But City bankers and hedge fund managers begged to differ, as they now (rightly) feared that the City which needs Europe to be an active international financial center, runs the risk of becoming progressively marginalized. 

With Cameron's precipitous and ill advised move, the UK has isolated itself from the European process of anchoring its currency and building "more Europe", as Merkel grandly calls it.

So tick off the UK. Regardless of what the British say in their press, they won't matter in the Euro crisis for some time to come.

So who matters? 

This is first and foremost a financial crisis. To understand who is really pulling the strings in this show you have to look at the big financial players. And that's not the European political class, and least of all  Merkel with her time-consuming cure aimed at the wrong objective: i.e. balancing budgets rather than stimulating growth. Only with growth is there a change to increase tax revenues and eventually achieve balanced budgets in future.

The market is fast and demands instant, credible solutions. Frau Merkel is slow and offers only long-run political solutions. If she has it her way, there will be plenty of time for the Euro to crash before European treaties requiring close fiscal discipline and coordination are amended and adopted.

Because there are forces at work right now to make the Euro crash: all those speculators who have placed their bets against the Euro. And it already hurts: there's a huge credit crunch going on at this time and European banks are scrambling to shore up their reserves. The last thing they're thinking of is to lend to their clients. Clearly a recipe for disaster and depression.

In these attacks against the Euro, American credit ratings agencies are playing a key role. They always issue warnings and downgrades at the most delicate junctures, precisely when a moment of silence would be welcome. Last week was no exception: before the Euro summit, they all announced that they were putting the Euro-zone members who still enjoyed an AAA rating  "under surveillance". That means of course Germany and France. And small wonder: the German economic model, depending as it does on exports, is about to come crashing down as the recession deepens and demand for its exports collapses.

Because collapse it must. The handwriting is on the wall. The credit crunch that is paralyzing European banks is already felt in Asia, where loans and support to business acquisitions is slowed down or even frozen. If Germany cannot sell to Southern Europe on which it has imposed austerity and cannot sell to Asia because European banks have seized up, who are the Germans going to sell to? The Russians? They're facing an economic slowdown. The Americans? Come on, the Americans have still to come out of their own slow-moving recession and solve their unemployment problem...

Since the Euro crisis is exquisitely financial, it requires financial measures to solve. Not amendment to treaties. Sure, in the long run, Frau Merkel is right: close coordination of fiscal policies and measures are required for the stability of the common currency. 

But is this the "fiscal compact" Mr. Draghi expected of Euro-zone governments? Surely he cannot hope for more from the European political class. Last week they gave all they had. And each country showed how committed it was to the European ideal: both Italy and Greece have gone to great pains to adopt belt-tightening measures. On the other side,  in addition to the UK, Sweden and Hungary have also shown how little they cared about Europe. They might yet change their mind, but for the time being, they have opted out, saying they need to consult with their parliaments.

Yet the European Central Bank so far hasn't moved...much. Last week (what a week!) it has indicated to Euro-zone banks that they could consider the ECB as their lender of last resort. That's a step in the right direction. But bond buying of Euro governments in distress is still off the books: so far, the Bank has bought some 200 billions worth of bonds, one tenth of what the American Federal Reserve has done over the same period of time. In other words, the European Central Bank is still toeing the German Bundesbank line of refusing any "quantitative easing". That's the fashionable term for resorting to the money printing press and it is something the Germans won't hear about, in the misplaced fear that this could cause some sort of hyper-inflation. Germans are obsessing over the hyperinflation they suffered in the 1920s and that brought Hitler into power. 

But times have changed! If anything, we're headed towards deflation - and even the Fed's generous quantitative easing has not had any noticeable inflationary impact...

Add to the mix the role of the American credit rating agencies, and you have a recipe for disaster.

The solution? Two major steps, one easy, the other not.

1. The European Central Bank should act as a central bank normally does, and engage in quantitative easing as appropriate and whenever needed; that's the easy step: once the ECB pulls out its bazooka, speculators will scramble for their lives...

2. American credit agencies should be taken off the books of whatever Euro-zone government structures where their rating is still used as a reference for investment (usually pension funds). This is something that is already proposed by America's banking regulators: that all references to credit rating agencies should be removed from regulations and be replaced with a formula based on a company's cash flow, leverage and volatility of its stock price to assess the riskiness of corporate debt. American banks have until February 2012 to comment on the new proposal before final rules are issued by the competent Federal authorities (the Federal Reserve, the FDIC and OCC).

Likewise, Europe should move forward on this chapter and a new Euro-zone credit agency should be created to substitute for the American ratings agencies, since they are even discredited in their own country. Of course this is not an easy step - the Chinese have already done so and created their own agency but it certainly hasn't yet attained the required credibility to be effective beyond China -. The process is undoubtedly delicate and time-consuming and complex (like Merkel's cure for the Euro). Nevertheless, it should be started. 

It makes no sense that the Euro-zone economic well-being should be in the hands of American credit agencies (whose customers are the speculators attacking the Euro). And it makes no sense that the Euro-zone has a common currency that no one, and least of all the European Central Bank, is willing to protect...
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