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1.16.2012

Occupy Wall Street? No, Occupy Rome and March to Athens!

Tents have come up by the dozen all over Rome, with posters of protest. Was it another Occupy Wall Street in the making? 


On January 14, I decided to take a stroll and find out. I came up to the old walls of Rome at the San Giovanni gate:


  
Crossing the gate, you arrive upon the vast piazza of San Giovanni, with the Church hiding behind the trees:




Across from it is St. Francis' statue, raising his arms to the sky and...covered with posters and surrounded by tents:




What do the posters say? There were more than I could take in, but the protest messages were quite clear:


Disobey!




Here you have to interpret a little: made in China = slavery, referring no doubt to the low pay and hard wok conditions of Chinese workers. And next to it in Spanish: This is not Woodstock, This is (a fight for) Justice (literally: this is not Woodstock, this is Right).


Far from not having any political ideas, they seem to be boiling over with them (with possibly some not quite "baked"). Here is one of the posters announcing their political activities:




It announces that on Sunday 15 January, they plan on having an assembly on the theme of Work and Social Income followed at 2 pm by a "*Carnival of the System* Creative Action Through the Streets of Rome". To be followed on Monday 16 by a "Meeting on the Situation in Palestine" and a "Proposal to [organize] a March to Palestine". Given the tension in Gaza, I wonder how many will decide to do that...


In case you missed the overall objective, here it is, spread in big letters across St Francis' statue:




Yes, it reads: "[For the] Construction [of a] Better Future". These kids certainly have a clear agenda: overhaul society and make it better. And just in case you didn't get it, here is the place they dedicate to the role of books and ideas:




The two posters in the back make it clear: "Because Books transmit the Revolution to [future] Generations" and "Because Change is Achieved through Culture". 


At that point, I wanted to know more about them. I spotted a couple of girls painting posters on the sidewalk and walked up to them:




I approached the girl who's turning our back to us in this picture and asked her what she was doing. A multiple poster, she said. If you look closely at the picture, you'll see she had completed the drawing of a missile and was now working on painting a peace dove. She showed me the sketch she was working from:




The message here needs no translation! 


I first started speaking to her in Italian and she shook her head, answering in Spanish. I asked her in that language whether she was coming from Spain and she said she came from France. At that point we both laughed and fell into French (my mother tongue). 


She told me there were about 80 of them in the encampment and that they came from everywhere: Australia, Bangladesh, Spain, Peru... Looking at them, anyone can see they come from all over:


She said she had joined them here in Rome on 5 January - and that there was a hard core of some 30 participants that had started from Nice (France) in November. They plan to walk down through Italy all the way to Bari and then cross over on a ferry headed for Greece. They expect to reach Athens by March, stopping along the way in all major towns to express their "indignation" - as they were doing here in Rome during their two week stay, organizing meetings and marches through town, like the one planned for Sunday, from Piazza San Giovanni to Piazza del Popolo.


I asked her whether she was staying with them till Athens but she shook her head, no, she was a design student in a Paris university and had to work and study.


So this is the March of the Indignados to Athens. When they stop on the way they are joined by others like this girl who give them a hand for a few days - thus clarifying to me one of the mysteries of the Occupy Wall Street protest movements. Since they last so long, I thought they included only the unemployed or otherwise disoccupied young. But no, that is not the case. Those who work join them temporarily, swelling their ranks when they stop in big cities and adding fuel to their enthusiasm...And while overwhelmingly young, there are some older people too, like this man on the foreground, busy drawing a poster:




I asked my French friend whether the police had bothered them and she shook her head. Actually people in the neighborhood were nice and supportive,she said. One had even lent them his apartment so they could have warm showers. And food was regularly brought to them every day:




Certainly the mild winter weather in Rome and Athens helps maintain the momentum of such protest movements. I imagine that for the moment, with snow and sleet, there are very few such movements in the States...


Is there any around you?

Post-scriptum: On Sunday January 15, the march across Rome from Piazza San Giovanni to Piazza del Popolo took a wrong turn. A small group (about 50, mostly French and Spanish) went as far as St Peter's and tried to set up a protest encampment, only to be dispersed by the police in riot gear. A couple of people got hurt but the plaza in front of St. Peter's was cleared.  

It seems one of the protesters was disguised in a pope's outfit and bore the slogan "indignant heart", a reference to the Spanish Indignados movement. They naively expected support from the Vatican. Instead, Father Federico Lombardi, the Vatican spokesman, said that "considering the actions undertaken and the language used, these Indignados evidently wanted to use the piazza in an improper way, not in keeping with the spirit of the place." 

It goes to show that some disobediance is ok but you can't win them all!




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1.13.2012

France and Italy Downgraded by the Credit Rating Agencies: a Plot Against the Euro?

The anger was palpable here in Italy as news of the Standard & Poor's downgrade spread this evening, Friday 13th. Anger was perhaps more muted in France and the French Finance Minister Baroin declared on French TV that he had half-expected it. And that in any case the credit agencies could not dictate French policy and that France would not undergo further austerity measures.

Crash-test of a 2010 Hyundai Tucson GLS at the...  Actually, a lot of people had expected the downgrade and to some extent the markets had probably already digested the news because their reaction was relatively subdued. The other two major agencies, Fitch and Moore's, were expected to follow soon. France lost its triple A rating by one notch and Italy was down two notches to BBB+ with a "negative" outlook.  All Euro-zone countries were downgraded except Germany, Belgium, the Netherlands and Luxemburg. Mind you Germany maintained its triple A but got a "negative" outlook.

Commentators across the political spectrum in Italy pointed to Prime Minister Monti's courageous package of austerity measures. You could sense the disappointment: after all, big efforts had been made - in the order of €30 billions.  The downgrading seemed to overlook the fact that Italy has one of the most solid banking sectors in Europe. For example, Italian banks hold some €750 million of "toxic" Greek bonds as compared with several billions said to be held by banks in France, Germany and the UK. Moreover, Italy presently enjoys a healthy public debt situation, with tax revenues reportedly flowing in at a higher rate than current payments on the debt.

Others pointed to another worrying dimension to the downgrading of the French debt: since France was originally one of the triple A rated Euro-zone governments guaranteeing the future European Financial Stability Fund (EFSF) designed to come in aid of Euro-zone governments in difficulty, its downgrading was seen as a bad omen for the future of the Euro.

How important is this? Frankly, I believe not that much. At this point in time, what the European Central Bank does (or doesn't do) is far more important for the health of the Euro than whatever role the EFSF might be able to play in future. More on this in a moment.

Another bad omen is the breakdown of the Greek government talks with private banks to renegotiate its debt. In practice, this could be interpreted as tantamount to a Greek default. This bit of news was overshadowed by the credit downgrading news, but from a practical point of view it is far more worrying. After all, credit rating agencies' reputation is not exactly golden: these are the same agencies that gave a few years ago a triple A to Enron and to American banks in spite of their subprime mortgage activities...And credit rating agencies get paid by their customers (banks etc) for this type of rating whereas the ratings on a country's sovereign debt are given out free. 

One may well wonder about such a business model that is predicated on a rather improbable wall separating the agencies' work on sovereign debt from that on private debt.

By Friday night,  a common statement was expected from Brussels but as I write it hasn't come yet. One can expect the Eurogroup Ministers of Finance to express disdain and contest the downgrading. They might even hint at creating a European Credit Rating Agency. Many see a "European" agency as the proper counter move against the "American" agencies. 

Apart from the chauvinistic satisfaction it might give some people, I don't believe a European credit agency would serve to change the rules of the game. 

First it would need to establish a reputation for independence. If it fails to do so, it would be useless - just as useless as the Chinese credit rating agency is. No one follows what the Chinese agency says because everyone is convinced it is subservient to the Chinese government. 

Second, there would be a need to change investment rules for many if not most big institutional investors (pension funds etc). This is the crux of the credit agency problem: a lot of institutional investors are obliged to follow investment rules that include respecting the ratings given by the "big" three agencies. So when Italy loses its A rating and goes into the B class, it can expect that a whole lot of investors that might have bought its bonds in future won't be able to do so anymore.

The solution? For the Euro, there is an urgent need to make investors AND credit rating agencies understand that the Euro is collectively defended and protected. It makes no sense at all to maintain the triple A credit rating for some countries like Germany and lower it for all the other Euro members. 

Because if France and Italy go down, you can bet that Germany will too. It may well be the biggest European economy and the healthiest in terms of employment and exports, but France and Italy taken together are much bigger than Germany. 

There is no way that Germany can sustain the Euro on its own. Nor for that matter can it get out of the Euro. If Germany tried to get out, leaving aside the cost and logistical mess caused by tearing up the Euro, one can expect the reborn Deutsche Mark to shoot up. It would probably to double the current level of the Euro, effectively killing off all German exports. Whereas, as of now, with a weak Euro with respect to the dollar, it's all to the benefit of German exports.

No, such a mega-scenario is not credible. 

The only problem and the real one is and remains Greece. The reason why talks have broken down with the European big banks (French, German etc) said to be holding Greek toxic bonds is simply that they probably...no longer hold these bonds! Rumors have been circulating that they had offloaded their bonds to private hedge funds located in London and elsewhere. So now all those banks look "clean" and the Greek bonds are in private hands somewhere and nobody knows where. But the investors who hold them are savvy types: I'm willing to bet they got them at say around 40% of value (or even less) and expect Greece to pay them at 50% (that's the rate that was reportedly under discussion) or higher. So in a few months they will have made tons of money...while the Greek GNP keeps contracting further and further under the weight of austerity measures.

Is that what Germany wants for its Euro partners? 

It is high time that the European political class stop talking about creating new European institutions such as the EFSF and concentrate instead on allowing the one institution that exists, the European Central Bank (ECB), to function as it should. It is incoherent to expect the ECB to fight inflation when the problem is recession and deflation. The Germans should understand this. 

The ECB chart does say the Bank is to fight inflation but it also says the Bank is supposed to insure the stability of the Euro. That means, regardless of what the Germans think, that the Bank must defend the Euro with all and every means available to a central bank.

When will the European Central Bank become independent from German diktaats?

Model of the ECB's new headquarters, which is ...                                    Model of New ECB Building to be Completed in 2014  
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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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