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May Day, May Day

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There was a sense of urgency, even emergency, in many countries on May
1 this year. The goings-on in the UK were muted in comparison:

France
Presidential incumbent Nicolas Sarkozy staged a rally in front of the Eiffel Tower called ‘The Feast of Real Work’, to counter the traditional show of heft by the left. ‘Put down
the red flag and serve France!’ he shouted to the unions. His campaign claims a turnout of 200,000.

The left was irritated by Sarkozy’s hijack of their celebration, and his insinuation that they don’t understand what work is. The far right, led by a scornful Marine Le Pen fresh from
rejecting an overture from Sarkozy, made their usual walk to the statue of Joan of Arc.

Cuba
Tens of thousands of workers marched through Havana’s Revolution Square, shouting ‘Socialism or death!’ and waving flags of Lenin and Che
Guevera. But the mood was not expansive (or expensive) — the government plans to cut the state payroll by 20 per cent, or a million workers. A banner said this is a time to ‘preserve
and perfect socialism’.

Malaysia
Najib Razak announced the country’s first-ever minimum wage, a monthly salary of 900 ringgit (that’s £185). This is not what the
‘Bersih’ protesters, who’ve taken to the streets in vast demonstrations in recent days, want — they’re pushing for electoral reform. The minimum wage is new to Asia
— Hong Kong introduced it last year, and China is considering it.

PIGS
There were anti-austerity marches in Greece, Spain, Portugal, Italy. A right-wing group in northern Italy stuck up posters outside cemeteries with the greeting ‘Happy May Day, workers who
have committed suicide’. Greece’s new Pasok leader Evangelos Venizelos told the Guardian that euro membership is at stake.

US
In a concerted effort to bring over large-scale European-style May Day protests to America, thousands of Occupy protestors stormed New York, Seattle, Portland,
Oakland.

UK
Between 50 and 100 Occupy activists set up camp outside the London Stock Exchange. Five were arrested. Some 150 protesters met at Bond Street Tube Station. A
few attempted to break into a Zara store.

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Bondholders are sheep — and they’re flocking out of the euro pen

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Sweden’s Anders Borg (Fraser’s favourite finance minister) is wrong, says Citigroup. Bondholders and deposit holders are not like wolves, as Borg has made them out to
be
. They’re more like sheep — and currently they’re baa-a-a-cking out of the eurozone pretty quickly.

We all know that money’s leaving the Continent — but how much and how rapidly? Citi’s credit strategist Matt King, basing his analysis on imbalances in TARGET2 (the euro area’s
main payment settlement system) relative to eurozone countries’ current accounts, has come up with a few interesting observations.

— Since mid-2011, Spain has suffered private-sector outflows of €100 billion, and Italy €160 billion (or a tenth of their respective GDPs), King estimates. Both countries are likely
to see further haemorrhaging of €200 billion each, and the speed of outflow is likely to quicken due to economic deterioration, ratings downgrades or a Greek exit. These estimates do not
account for domestic deposit flight.

— In Greece, Ireland and Portugal, foreign deposits have fallen by an average of 52 per cent, and foreign government bond holdings by 33 per cent, from their peaks.

— Capital flight from Greece, Ireland and Portugal is impervious to market moods or movements, continuing steadily even during periods when the economic situation seemed more stable (such as
the second half of 2010 in Portugal and in 2011 in Ireland). ‘Once begun, it does not stop,’ says King, pointing out that the LTRO-driven rally in Spain and Italy did not stem outflows either. ‘It’s almost as though a switch has been
tripped.’

This switch-tripping tendency, says King, is because bond and deposit holders are by nature ovine. ‘Bondholders are not at heart the wolf pack Swedish Finance Minister Anders Borg famously
made them out to be,’ says King. ‘Sheep, or perhaps wildebeest, would be a more accurate description.’

Bondholders and depositors graze quietly upon their coupons or interest payments, relying on others — such as rating agencies — to warn them of oncoming fundamental risks. ‘Once
the flock has been disturbed, though, it can run quite quickly’ — and it’s almost impossible to get it to turn back.

Where is the flock headed, though? Citi’s research note does not cover this aspect, but George Osborne and Mervyn King are probably hoping the sheep will make their way to UK pastures and
start grazing on gilts.

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Of technocrats and democrats

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A former European leader was a guest at a private dinner in London recently. It was a polite and reverential occasion, but conversation grew lighter as Sauternes gave way to port. What, he was asked, is the most effective form of government? Easy, he replied, look at Europe: technocrats know best and they can ignore short-sighted voters.

A battle between technocracy and democracy has broken out in Europe, as democratic Germany and technocratic Italy disagree over the next step in the euro-crisis. Last week’s G20 summit promised progress; Germany agreed to use EU bailout funds to reduce Spanish and Italian borrowing costs. It was hoped that this might inaugerate the age of Eurobonds — a key Italian objective informed by the belief that fiscal transfers are the country’s only possible salvation.

But, Angela Merkel has again said that there will only be Eurobonds over her dead body; a statement that reflects German voters’ pronounced hostility to the idea. The Italian Prime Minister, Mario Monti, responded by delivering an evisceration of German policy on the floor of Italy’s parliamentary chamber and it is rumoured that he threatened to resign. The rumour was swiftly denied by authorities in Rome; but speculation about the future of Monti’s government persists, with some commentators suggesting that it is logical for a government appointed by Brussels to disintegrate if Brussels will not let it govern.

This vacuum is stoking talk of change and elections. Out of uncertainty crawls the familiar frame of Silvio Berlusconi, the self-professed father of the nation and leader of the largest party in the Italian parliament. He has been firing mad provocations at all and sundry over the last month, in a blatant pitch for popular support. In Berlusconi’s bunga-bunga world, Angela Merkel is a demonic she-elephant and austerity a foreign innovation. It is time for an insurgency. Berlusconi has said that if the ECB does not ‘act like the Fed’ then Italy should print its own euros, which is surely the first time that a politician has advocated counterfeiting the national currency. Finally, he insists that it is ‘not blasphemy’ to talk of Italy leaving the euro.

This litany of retrospective euroscepticism is especially ironic given that Berlusconi was, if not an architect of the European mansion then certainly one of its interior designers. The general lack of conviction, the inconstancy, is what makes the august gentleman who came to London a few months ago despair of democracy. But, equally, his unpalatable solution seems to be no more effective where the Eurozone is concerned.

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Europe’s illusory deal

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After Merkel’s decision to allow Eurozone funds to be used to bail out Spanish and Italian banks, the press tomorrow may declare – yet again – that some kind of breakthrough has been reached and that the Teutonic queen of austerity has been forced down from her throne. But, as ever with the Euro summits, there is less – far less – than meets the eye. Here’s my take: 

1. Growth pact. Any pact representing no more than 0.0096 per cent of Eurozone GDP is hardly going to have a discernible effect, so let’s not pretend otherwise.

2. About those no-strings bailouts. It seems countries can access bailout funds without conditions forcing more austerity, as long as they comply with the Stability and Growth Pact. But how many countries at risk of needing money from bailout funds comply with those pacts? Zero.

3. Good news for Italy. According to its European commitments, Italy should close its fiscal deficit in 2012. If Eurozone authorities are generous in a likely request from Italy that the bailout mechanism purchases Italian bonds to drive down yields, Italy may pass. It seems safe to say that we will probably find out before long.

4. Numbers don’t add up. To calm the markets, any bailout mechanism would have to have more than €2 trillion at its disposal. Together, the EFSF and the ESM have the capacity to lend €500 billion. As the Eurozone has committed itself to assist the Spanish banking sector with €100 billion, only €400 billion euros remain, of which a further €100 billion could be needed for Portugal and Ireland, and after other commitments have been met only €250bn will remain. That won’t take the Eurozone far if it is to purchase Spanish and Italian bonds.

5. The bailout fund is not fit for purpose. I hate to say it, but there is insufficient money in the bailout structure to cover such a scenario. If all new resources recently raised by the IMF are also used, total financing needs for Spain and Italy in 2012-2014 could possibly be covered. But that would exhaust all existing committed resources, and a structure like the ESM is not built to be completely exhausted. Its credibility on the markets is based on the combination of paid-in capital and the capacity of big solvent economies to actually cover their capital-subscription liabilities if required. Like other schemes of this kind, the Eurozone bailout fund is durable only so long as investors believe that countries will not be asked to cover their liabilities.

6. This summit is no turning point. It may improve the flow of bailout funds to needy countries, but it is not a game changer. Only the European Central bank has pockets deep enough to give the much-needed systemic guarantee of the euro’s survival.

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Raphael’s paintbrush

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One of the puns that circulated the cultured elite of Italy during the Renaissance compared the potency of an artist’s paintbrush, his pennello, with his penis, il pene. Raphael, who by all accounts liked his women, perhaps embodied that duality best of all. The artist’s fascination with female kind, Antonio Forcellino suggests in his brilliant and lyrical biography of the artist, helped shape his genius.

Not long before Raphael died, aged just 37, of a malady popularly believed to have stemmed from excessive sexual activity, he painted La Fornarina — a young, brown-eyed beauty (perhaps his last lover), semi-nude but for a diaphanous veil draped beneath her décolletage. Around this date he also painted a heavily veiled woman, La Velata. Like a silver-tongued sleuth Forcellino picks apart these contrasting images to show how evenly — but deceptively — matched they are in the degree to which they are sexualized. Raphael worked his female sitters in this way, Forcellino suggests, as a remedy to his own feelings:

‘Through the silken touch of the brushes, which left no trace on the canvas, Raphael stole his lovers’ beauty and transferred it into paint, possessing it for ever: it was a privilege that not even a prince could boast, even if he were Pope…’

Raphael’s pennello was timelessly penetrating.

But could the sort of fascination and intimacy with women that Forcellino describes really make a man paint them better? One of the figures Raphael met when he came to work in Florence was Leonardo da Vinci, who was homosexual, and now in his early fifties. Raphael, Forcellino says, ‘absorbed the mystery of Leonardo’. Quite what that meant, in practice, isn’t entirely clear. Certainly Raphael absorbed (or perhaps rather reflected) Leonardo’s light. Whether he also had an advantage over Leonardo through his ability to read the female mind, as Forcellino suggests, is perhaps a little less tenable a view. Last year, when a number of Leonardo’s portraits came to London, no one had the gall to suggest that his lack of physical involvement with his sitters hindered his ability to bring them to life. Forcellino doesn’t suggest that it did, but one becomes very aware of how difficult it is to entwine art and reality in this way in piecing together an artist’s history.

That said, one of the big problems with writing a biography of someone as prodigious (a word the author is fond of) as Raphael is that it is almost impossible to make him familiar; he was, and will remain, in some sense untouchable. Forcellino’s exploration of both the personal and the professional relationships Raphael developed does seep across that barrier remarkably well.

Trained, at first, in his father’s modest workshop, Raphael of Urbino was still very young when he came into contact with the major players in North Italian politics. Forcellino focuses particularly on his work for Pope Julius II, the war-mongering ruler who vowed (illegally) to wear a beard until such time as he should capture Ferrara, an increasingly distant pipedream. While, traditionally, many have shuddered at the sight of Raphael’s portrait of the bearded Julius II (today in London’s National Gallery), Forcellino encourages a more sympathetic view of the subject, a weathered man, who has lost his grip upon the throne he grasps so tightly in his portrait.  

One gains the impression, in general, that Raphael was no pawn to Popes or Dukes. If anything, the letters which survive and are analysed in this book reveal him to be just as self-assured as Vasari portrayed him in his Vite — essentially Raphael’s earliest biography. The masterful quality of Forcellino’s account lies not only in the beauty of its language, translated impeccably from Italian into English, but in the seamlessness and self-assurance with which he himself works across northern Italy, its paintings, its politics.

Raphael A Passionate Life by Antonio Forcellino (translated by Lucinda Byatt) is published by Polity Books

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I need your help

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I am in southern Italy and there has been thunder and lightning pretty much continuously since Tuesday. I am quite scared of lightning. I need to buy some comestibles; especially wine and cigarettes. But the tiny apartment I have rented is connected to the outside world only by 72 metal steps affixed to the side of the mountain by metal scaffolding. The lightning is all about. Should I risk it? Would it help if I wore rubber-soled shoes for my dash to the shop? Or will I be forever fused to the rockface, like a sort of crap gargoyle? I turn to you for help, and succour.

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Mario Monti resigns

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Following the passing of his budget, Mario Monti has quit as Italian Prime Minister. At the moment, it remains unclear whether he’ll continue to lead the government until elections next year.

Many in the Italian establishment—and, I understand, several European leaders—would dearly love Monti to emerge as the leader of a centrist coalition ahead of the election, though as a Senator for Life he can’t run in the election himself. They view the popular endorsement of Monti’s reforms as the best possible result for the stability of the Eurozone.

What seems certain, though, is that the Italian elections will be highly unpredictable. The presence of both a comic and Silvio Berlusconi in the race guarantees that it will not be a conventional contest.

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Italian elections: anti-politics on amphetamines

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Rome

Italians go to the polls today, and Beppe Grillo still seems to be the name on everybody’s lips. Grillo is expected to get up to 22 per cent of the vote — staggering for a comedian-turned-politician with no discernable policies whose campaign slogan is ‘vaffanculo’ (‘F— off!’). Il Fenomeno Grillo is anti-politics on amphetamines. Is Italian democracy self-immolating? Maybe. Faced with nothing but corruption, recession, imposed EU austerity, and the same old politicians, the downtrodden public are fed up and turning on the system. You can’t really blame them. Some of the Italians I spoken to here today think it is scandalous that Grillo has so much support — ‘What does he stand for?’ said one, ‘naaathing’ — and the mainstream parties hope that Grillo will slip in the last stretch.

But others point out that the young, poor, and squeezed middle classes have nobody better to support. The alternatives — Bersani, Monti and, of course, Berlusconi — are proven failures. Young people, apparently, think the system is ‘the real joke’. Or, as one 30-year-old Roman put it to me earlier, ‘I vote Grillo — of course. What else do you want me to do?”

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Weary Italian voters can teach UK politicians lessons

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Italian voters are clearly cheesed off: with the Establishment, and with the country’s austerity programme. The explosion onto the scene of Beppe Grillo – which Freddy examined in his post from Rome on Sunday – shows quite how cheesed off they are, and it also has wider lessons for the eurozone and for UK politics, too.

The first is that voters clearly do not share eurozone leaders’ unswerving commitment to the euro project: Grillo made much of his party’s eurosceptic credentials and won 54 seats in the upper house, with Berlusconi’s centre-right on 116, while Mario Monti, the conduit for the EU’s austerity measures, won only 18. No alliance gained the 158 seats needed for a majority in the Senate. Though austerity is inevitable for Italy, its voters are wearied of it and of Europe. Mario Draghi said last summer that European leaders would do ‘whatever it takes’ to protect the euro and eurozone countries: Italian voters, at least, don’t feel quite so energised about that.

There are lessons for UK politicians, too. Allister Heath argues in his City AM column today that Italian voters were showing their disgust with the Establishment in general, and as he points out, our Establishment in this country is hardly garnering more trust currently. The rise of the protest vote isn’t just confined to a party led by a comedian with a manslaughter conviction campaigning against corruption in Italy: in this country we have UKIP, which is managing to bleed support from all the major parties as voters grow grumpy with their promises and failures.

But there is another thing our politicians should mull over from today’s ‘Italian voters reject austerity’ headlines. While our own situation is quite clearly different, there is growing unease at the ‘rhetoric of austerity’, even when, as Fraser explained a month ago, the rhetoric doesn’t match the reality. George Osborne is cutting total spending by 3.2 per cent over four years, but if you spend a couple of hours in the House of Commons Chamber, you might be forgiven for thinking that he’s slashed it in half. Tory backbenchers such as Philip Davies are now talking about the need for ‘proper spending cuts’, as though they haven’t happened yet, when the prevailing narrative is that they have. It could be that at the next election the Conservatives are punished for talking about austerity rather than actually doing it, with their successors having to do the heavy lifting.

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Italian elections: ‘The worst possible outcome’

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Forget Moody’s. If you want to see market panic, just look at Italy. As Isabel reported this morning, the unexpectedly strong performance of Beppe Grillo’s anti-establishment party, the Five Star Movement, has produced an extremely close election result, and no clear winner.

While the electoral system guarantees a majority in the Chamber of Deputies for the group with the largest vote share (Pier Luigi Bersani’s centre-left group), it does not do so for the Senate. With no group securing a majority in the upper house, Italy now faces coalition negotiations and likely another election.

Citi calls this ‘probably the worst possible outcome for Italy’ — thanks to the political uncertainty, the ‘anti-austerity message being conveyed by voters’ and the ‘absence of a cohesive and credible political leadership’. And the markets seem to agree. The Italian stock exchange has fallen by 6.7 per cent since yesterday afternoon, and the euro is down by around 2 cents against the dollar, from $1.33 to $1.31. The yield on ten-year government bonds has risen by 0.32 points, from 4.49 per cent at close yesterday to 4.81 now – though it’s still nowhere near the 7.4 per cent high seen when Berlusconi resigned in November 2011.

Unlike the UK, Italy’s economic problems do not include a particularly big deficit:

Indeed, the Italians have eliminated their structural deficit, something the UK won’t achieve until 2018 at the earliest:

Instead, Italy’s problems are a very weak economy and high government debt. It’s GDP is now 7.7 per cent below its pre-recession peak, and is expected to continue to fall this year:

And whereas the UK entered the recession with government debt below 40 per cent of GDP, Italy’s was already around 90 per cent, and now stands at about 100 per cent:

If the Italians are to tackle that debt burden, they’re going to need to press on with the austerity programme they’ve shown such hostility towards in these elections.

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Why I love Beppe Grillo

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‘Crazy Italians!’ you might think.  Offered the choice between Bunga Bunga Berlusconi, an ex-Communist and a Brussels stooge, one in four of them went and voted for a stand up comedian.

Ever since Beppe Grillo’s shock success in the Italian elections, serious pundits in the mainstream media have been inviting us to disapprove. We are supposed to roll our eyes at the idea that Italians seem unwilling to accept austerity.  We are meant to tut tut at the failure of their democracy to produce a stable administration willing to take instruction from the Eurosystem.

This only goes to show, imply the poobahs and the pundits, that Italian democracy is in crisis. Nonsense.  What happened in Italy shows that politics is – thanks to the internet – being reborn.

Politics in the West, I speculate in my book on iDemocracy published last year, is going to be ‘shaped by groups of like-minded people, mobilising online’.  The internet will allow new entrants to emerge rapidly and win a large share of the political market.  Four months later, Italian blogger Beppe Grillo’s Five Star Movement came from nowhere to win over a quarter of the popular vote.

Merely attributing Grillo’s success to austerity and anti-politics tells us little.  There has been a strong anti-politician sentiment in Italy for years.  Those of us who have lived there know that strikes against government cut backs have been a regular feature of life in Italy for as long as anyone can remember.

No, the real game changer is the internet.  It means that ordinary folk can do something about it all.

Before we had blogs and twitter, it was the job of established political parties to aggregate opinion and votes.  The internet means that opinion and votes can now be aggregated online.  In fact, the Five Star Movement seems to have done a better job doing so than the big corporate parties, for example allowing every Italian to help select its candidates by voting online.

In Italy, like in this country, politicians once had to communicate with the voters entirely thorough the media.  That tended to favour the two (and a half) party system, acting as a barrier to new entrants.

Not any more.  The digital revolution means that ‘what politicians say will no longer be assessed through pundits … but gauged by the crowds online’.  Thanks to the internet, it is now possible to create a political brand, without massive amounts of money.

Sure enough, Beppe Grillo – whose party refuses to accept state funding for political parties – tends not to give mainstream media interviews, yet talks directly to an audience of millions on his blog.

‘But Beppe Grillo is mad!’ I hear you say.  ‘He wants … um … a referendum on the euro.  An end to bank bailouts.  More local decision making. Less government.’

Is that really so daft?  It sounds a lot more sane than those who insist that ordinary Italians must pay the price to rescue greedy bankers from their own euro follies.  The citizen consumer class in Italy seems to agree.

Beppe Grillo might not be around in Italian politics in a few years. But the internet, and the profound changes that it is starting to bring to the way that we organise politics and society, has only just got started.

Douglas Carswell’s book on The End of Politics and the Birth of iDemocracy was published by Biteback in October 2012.

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Papal Conclave: would a result today mean Angelo Scola is Pope?

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White smoke from the Vatican this afternoon may signal that the new Pope is Cardinal Angelo Scola. But the longer the papal conclave goes on, the more likely it becomes that St Peter’s next successor will be a global figure – which probably means either a North or Latin American, rather than an African or Asian.

That, at least, is the prevailing consensus of the Vaticanisti this morning. And it makes sense. Scola, probably the least talked about of the heavy favourites, is the obvious choice to follow Pope Benedict: a theologian of similarly high standing (though his writings are less accessible to lay readers), he has grown in stature in the last few years, and is widely respected among – and familiar to – the Church hierarchy. He is Italian. He is, moreover, thought to have enough administrative experience, having been Patriarch of Venice and Archbishop of Milan.

The idea also is that a longer Conclave means that the American bloc – which is now thought to contain both Latin and North American Cardinals, together supposedly determined to reform the scandal-prone Curia – may be able to cobble together enough support for their preferred candidate. But nobody is sure who that is. It could be a north American (perhaps Cardinal Dolan, my initial tip or a Brazilian, either Cardinal Scherer or Cardinal João Braz de Aviz). According to this line of argument, the longer the process takes, the further from Rome the new Vicar of Christ will have travelled. A really long Conclave thus would increase the chances of a developing world figure, like the Filipino Cardinal Tagle.

At the same time, there is an extent to which the experts are modelling their theories on what happened in 2005. The dynamics of this Conclave are very different. Eight years ago, Joseph Ratzinger was the obvious quick choice. His opponents in the College of Cardinals pushed, it is said, for the Argentine Cardinal Jorge Bergoglio (who is in the Sistine Chapel again this week) but they fell short. Ratzinger had too much support within and without the Curia. Scola does not have quite the same sway.

It’s all too contradictory for confident assertions. Vatican insiders also say that the more curial-minded electors – many of whom are Italian – are keen for a world figure who will not interfere with their control of the Vatican, while foreign Archbishops want a Roman figure to shake things up in and around St Peter’s.

You could go mad trying to get your head around the manifold possibilities. Today, though, Scola is the name on everyone’s lips.  

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The Lampedusa hypocrisy: Italy prefers its migrants dead on arrival

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Italy has held a day of national mourning in memory of those who died in the 3 October disaster off Lampedusa. The victims – mostly from Eritrea, Somalia and Syria – were given Italian citizenship posthumously and are now – it was announced yesterday – to be honoured at a state funeral. The desire of the Italian government to salve its conscience following the fire and shipwreck that cost an estimated 250 lives is understandable. But such measures are grotesque and will only reinforce the idea, among would-be refugees and their advocates, that a dead migrant is preferable – at least in the eyes of the receiving country – to a live one. Will the Italian authorities, I wonder, be so keen to grant the survivors citizenship? Or even allow them into the country?

The disaster off Lampedusa was shocking in its scale and in the graphic accounts given by survivors and their rescuers and broadcast around the world. But these are the only ways in which it was unique. Would-be migrants to Europe perish regularly in the waters off north Africa, as many as 20,000 so far this year. Some, perhaps many, of their boats have actually been forced away from the Italian coast by border officials and forced to remain in international waters. To argue since last week, as many well-meaning people have, that the European Union needs to be more generous to migrants completely ignores the reality that public opinion, not just in Italy, but in many receiving countries, is overwhelmingly hostile to any increase in the number of migrants. Not only that, but a more liberal policy will result in many more new arrivals who are really quite difficult to integrate.

Yes, the EU should increase the amount of money it allocates for resettlement; yes, it should get a proper dispersal policy, so that Italy and others on the front line are not left to bear the burden alone, and yes, the criteria for settlement should be standardised. But perhaps those who have argued for a more generous policy in the past couple of weeks should be given the task of administering it, arguing the political toss with the voters and raising the money. Organising a state funeral is a simple undertaking, by comparison.

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The EU is corrupt because southern Europe is corrupt

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What with Britain’s dreadful performance in the PISA educational rankings, there has been comparatively little attention given to another international league table– Transparency International’s Corruption Perception Index.

The good news is that Bulgaria and Romania, with whom we will become much more intimate next month, are already in the EU’s top 5 for corruption, placed 2nd and 4th, with Greece, Italy and Slovakia filling out the leader board.

I don’t object to Romanian and Bulgarian EU citizens being able to come to Britain as such, I object to the very idea of these countries joining the polity of which I am a member.

But then I’m not too happy about being part of the same state as Greece and Italy, for the same reason. Perhaps I have to add some sort of caveat here about liking Italian and Greek people, as if not wanting to move in with someone and share their bank account or bed meant you hated them; yet although such a caveat would be absolutely true, corruption levels are a reflection of public morality.

Italians have a great deal of campanilismo, which translates as a sense of concentric loyalty, so that a good Italian is devoted to his village, region, province and only then his nation. It is a word with no English translation, and I’m guessing no equivalent in Dutch, German or the Scandinavian languages. It’s partly why Italy and Greece, while having the best architecture, food and history, and being home to wonderful, warm people, are by northern European standards failed states.

I’m currently reading Paul Collier’s Exodus, which makes some compelling points about the social effects of immigration, and further confirms my (deeply ingrained and prejudiced) belief that economists who make pronouncements on matters of policy while ignoring the social implications are the great charlatans of our age. Collier looks at how game theory applies in different societies and suggests that Nigeria is riddled with corruption and theft because enough people are corrupt (and it doesn’t have to be that many) that it makes no sense to be an honest person.

For societies to avert this situation free-riders need to be punished (shamed, ostracised, prosecuted) by other individuals acting with the support of the rest of society, and almost as importantly, for those punishers not to be punished in turn, as happens in clannish societies where people care more about their family than the well-being of the wider society. Destroying the power of the clans can take a very, very long time; around the North Sea it began a good millennium ago.

Collier also made a point that is relevant both to migration and super-national states. He points out that as well as minorities integrating into a society’s norms, the majority may start to integrate into the minority, if it is large enough, or if its cultural norms give an individual an advantage. He uses a study of diplomats in New York to show that, when a group of people from a more honest society and a group from a corrupt one join together, the former begin behaving like the latter. This is known as Steyn’s Maxim, after Mark Steyn’s comments about ice cream, dog faeces and the UN, and it fits perfectly into evolutionary game theory. Why would you be honest if everyone around you is on the fiddle? This has major implications for welfare, too.

The European Union might work well if it only accepted countries with a maximum level of corruption, which would in effect be a North European Union, but the EU must expand to further pressure troublesome members (ie Britain) thinking of seceding. This month the union will make a decision on admitting Albania, the most clannish society in Europe and with corruption levels off the scale.

How can Albania and Denmark fit inside the same polity? Only an economist would think that a good idea.

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Venetian secessionists deserve to be punished!

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How should the western powers react when part of a friendly nation holds an illegal referendum and votes to secede from the country in which hitherto it was located? Sanctions? Military reprisals? We’d better send the gunships to the watery redoubt of Venice, then, which has just voted overwhelmingly to leave Italy. The Venetians, part of Italy for 150 years, are sick of paying taxes to bail out the indolent and mafia-ridden south of the country and wish to go it alone. The rest of Lombardy may soon follow suit. Rome has refused to recognise the plebiscite, fearing that the entire country may cease to exist. No sense of history, these Venetians. For them, Garibaldi is just a biscuit.

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The minimum wage is broken – here’s how to fix it

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While welcoming George Osborne’s emphasis this week on raising employment, I have some caveats about his target – to have the highest employment rate in the G7. This isn’t hugely challenging. Those in employment currently amount to 71.2 per cent of the UK population of working age, well ahead of Italy (55.5 per cent), France (64.1 per cent) and even the USA (67.4 per cent). Germany, at 73.5 per cent, is the current table-topper and the one Mr Osborne aims to overtake.

Aggregates like this, though, are dodgy to interpret and are affected by differences in age cohort size and other factors.

For example, the rising numbers of younger women in the workforce with degrees will almost certainly boost employment rates in the next few years, as will immigration flows and the increase in the state pension age. It will then be difficult to discern exactly what part Mr Osborne’s efforts will play in any rise in employment.

No doubt his heart’s in the right place. But what’s he doing? He rightly points out that the public sector cannot really create jobs and that the private sector has to do the dirty work. Yet it can only do so if businesses find it profitable to take on extra workers, or extend hours for those they currently employ.

They can’t do this if employment regulation continues to increase, as it has under the Coalition, with increases in parental and other leave, rights to flexible working, pension auto-enrolment, restrictions on employing foreign workers and agency staff, and threatened limitations on zero-hours contracts.

Another area where George Osborne is decidedly flaky is the National Minimum Wage. Although the government has accepted the Low Pay Commission’s recent recommendation, he is on record as wanting a more substantial increase. Other conservatives, notably Boris Johnson, are flirting with the Living Wage, an hourly rate dramatically higher than the NMW. As Ryan Bourne and I argue in our new IEA publication The Minimum Wage: Silver Bullet or Poisoned Chalice?, such ideas are ill-advised.

Minimum wages are poorly targeted to deal with poverty, with many beneficiaries in non-poor households while the real problem – as Mr Osborne realises – is those with no jobs.

We suggest regionalisation of the NMW, as its ‘bite’ varies so considerably around the country. While the NMW is less than 40 per cent of median hourly earnings in London, it is 60 per cent in Wales. To maximise private sector employment then, minimum wages could be set by region to reflect productivity and firms’ ability to pay.

We are also recommending abolition of the minimum for under-18s. With very high levels of youth unemployment, young people without skills need to be priced into work. We should of course be working to improve those skills – our performance in schools and collages is still far from adequate, as the British Chambers of Commerce pointed out again yesterday – but Mr Osborne won’t improve matters by listening to the ‘economics deniers’ who insist that wage levels have no effect on employment.

J. R. Shackleton is Professor of Economics at the University of Buckingham and editor of Economic Affairs. He is co-author of the Institute of Economic Affairs paper The Minimum Wage: Silver Bullet or Poisoned Chalice? which is published today.

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World Cup diary: Italy were poor but England were worse

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Another fairly unpleasant evening spent watching England playing football. Ah well.

It used to be that England were renowned for two things: we could score from set pieces, and we knew how to defend set pieces. In fact we rarely scored from open play – but give us a corner, or a free kick, and suddenly we became dangerous. Similarly, we rarely conceded from set pieces. This was a consequence of the English game, I suppose.

Against Italy we conceded from a set piece in fairly lamentable fashion. Worse, though, was the endless parade of wasted corners and free kicks. I don’t know how many corners we had in the second half – maybe eight? Only one found the head of an England player. The free kicks were worse: someone needs to take the likeable Steven Gerard aside and tell him it ain’t 2001 any more , you can’t do it, mate. Rooney was, if anything, worse – although he provided a fine pass for Sturridge’s well-taken goal.

Raheem Sterling was excellent, so too Barkley late on. We didn’t see enough of Adam Lallana. In general, though, we were ponderous and predictable, too slow to switch the ball around, lacking a player who could provide an incisive pass in the last third, almost never doing the unexpected – which, if you disdain scoring opportunities from set pieces, is the way you get goals from open play. The unpredictable. Sterling has it, but nobody else.

Worst thing is, I didn’t think Italy were up to much, either; largely anodyne going forward. Sweaty, pasta-munching, hobgoblins.

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Think Britain’s tabloid journalists are bad? Try Italy’s tabloid judges

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There is a small light at the end of the tunnel but it comes too late, I fear, to save Italy from the abyss:  Silvio Berlusconi was yesterday acquitted on appeal of committing Bunga Bunga with Ruby the Heart-Stealer when she was sweet 17 for which he had been sentenced to seven years in prison. Che bello!

Yet if ever a reason were needed for Britain to have absolutely nothing whatsoever to do with European courts of any kind, and the European Arrest Warrant in particular, we need look no further than the Berlusconi Bunga Bunga trial.

If it could happen to him, a media tycoon and four times Italian Prime Minister, it could happen to you. We are all guilty of something – if need be – as the 20-year-long judicial jihad waged by the Italian magistratura against Berlusconi demonstrates so clearly.

Let us be frank: the European Arrest Warrant gives a judicial system such as Italy’s the power to come and get you in Britain and bang you up in an Italian jail, for up to a year, on suspicion that you committed a crime while it tries to find sufficient evidence to charge you.

This is totally at odds with the British way of doing justice. In Britain, a suspect can be held in custody for a maximum of 96 hours without charge – or in the special case of a terrorist suspect 28 days.

It gets worse, of course. For how could it not when Italians are involved? Once put under investigation in a place like Italy you enter, like Josef K. in Franz Kafka’s The Trial, a life-destroying and tortuously slow judicial system where the process regularly takes 10 years to conclude. Worse still, Italian courts pay only lip service to the sacred ‘beyond reasonable doubt’ principle and invariably convict on the basis of ‘he must have done it’ and sod the evidence. Either way, whether pronounced guilty or innocent, the suspect emerges at the end of the process a ruined man.

Miraculously, Berlusconi has won his appeal against conviction in the Bunga Bunga trial but justice has come too late to save either his shattered reputation or, in all probability, his political career. And let us not forget: in Italy, the prosecution can still appeal against the appeal!

The Bunga Bunga business made Berlusconi an international laughing stock, forced his resignation as Italian Premier in November 2011, and led to him being sentenced in June 2013 to seven years in prison for under-age prostitution and abuse of office.

Since his resignation, Italy has had three un-elected Prime Ministers and things have just gone from bad to worse.

Now that he has been acquitted, who will pay for the stratospheric damage done by this ludicrous trial, not just to the reputation of Berlusconi who in the 2008 elections had secured the biggest majority of any post-war Italian Prime Minister, but to the Italian economy? No one, of course.

In Britain, people whine on with some justification about intrusive tabloid journalists. But Britain’s tabloid boys are mere pussycats compared to Italy’s tabloid judges who – like Robespierre and his revolutionary courts – are politically motivated and possess terrifying powers that they use in an arbitrary way for political ends.

They do not limit themselves to hacking text messages. They hack the phone calls themselves, of all and sundry, at industrial levels and, if it serves their purpose, which in Berlusconi’s case it always did, they leak the transcripts of those phone calls to the media which then publish them verbatim – well before even formal charges are laid let alone a trial has begun. Such grotesque contempt of court happens on a daily basis in Italy but no Italian judge or journalist ever gets prosecuted and no one bats an eyelid.

The Bunga Bunga trial would never have happened in a normal country – not even in a Britain gripped as it is by medieval mass paedomania.

Let me try to explain why. At the time of the alleged offences in 2010 Berlusconi was 73 and a prostate cancer survivor. Ok, so let us assume that with Viagra and all the rest of it, he could still get it up.

Where was the evidence that he did in fact get it up with Ruby? Well – here’s the funny thing – there was none. Both he and she  – the alleged victim – denied sex and there were no witnesses to them having sex. So, no sex, no crime, no?

As for the abuse of office charge, this was based on a phone call Berlusconi made to a police station in Milan one night after Ruby had been arrested for suspected theft and she had phoned him for help. He had duly obliged. None of the police officers he spoke to on the phone that night felt that he had abused his office to force their hand in any way. In other words, he had simply behaved as any gentleman would to help a damsel in distress.

Yet, thanks to that phone call (for which he got six years in jail) and the presence of Ruby the Heart-Stealer on a couple of occasions at his Milan home during his regular parties (for which he got one year) the phrase Bunga Bunga went viral and he was tried and convicted for being a paedophile whore-monger.

All thanks to Italy’s tabloid judges and their friends in the media – the very same media that insists that as a result of media tycoon Berlusconi there is no media freedom in Italy.

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The Spectator at war: The consequences of neutrality

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From The Spectator, 10 October 1914:

IT would be a base act to try to bribe or to threaten a neutral Power like Italy into joining the Allies. The notion of taking up the attitude that she may find herself in the wrong box when the peace is made is one which must be utterly hateful to every Englishman. Not only is it certain that if Italy remains neutral, and does not come to the assistance of the Allies, no vengeance will be taken upon her for her aloofness, but, more than that, no one here will even pretend that her failure to show an active friendship with us may have terrible consequences. If the Italian Government feel that their duty to their people is to stand aside, or if they have come to the conclusion that the burden of the war, even with such allies as Britain, France, and Russia, is too great for them to bear, then by all means let the Italians stand out. In this case, however, they must take the consequences of their attitude, for important consequences there must be, whatever they do or refrain from doing at such a crisis as the present. They may be assured, however, that the consequences of continuing their neutrality will not, if the Allies win, bring ruin on them. In other words, they can remain secure within their own borders and their pleasant fields will not know war, if that is what they want above all things. But other consequences there must be. No nation in the world can eat their cake and have it.

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Should we revive the Colosseum?

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It occurs to me that Italy isn’t the best place to live if you’re an architect. Take a walk at random through Rome or Florence or Venice, and it is quite possible that you won’t pass a single building made in the last century, let alone the last decade. Certainly, no one needs a Cheesegrater grating bolts all over the place when there are so many historic monuments to preserve. But while Italy’s old buildings are nectar to tourists, they can prove a headache for those trying to adapt their cities to modern life.

No surprise, then, that some Italians have come out in support last week of a proposal to restore the floor of the Colosseum in Rome. In theory, this could lead to the building being used again as an arena, rather than merely preserved and tiptoed around as an historical site.

Italian culture minister Dario Franceschini is backing the idea ‘to give the Colosseum back its arena’ after an archaeologist suggested covering with a new stage its central section, where ancient underground tunnels and compartments for gladiators and animals lie exposed to view. ‘Basta un po’ di coraggio’ (‘Just need a little courage’), he tweeted.

Courage, I presume, to see the likes of Enrique Iglesias take to the stage where once gladiators fought to the death. For there is nothing particularly courageous about replacing the central floor, provided it is done with care. There is already a wooden, crescent-shaped platform over one part of the amphitheatre. A full stage could make the building look even more like it did when it was completed in AD 80.

If the idea is taken up, it won’t be in the interest of reviving cultural accuracy, but of encouraging the public to help with the building’s costs. Already one can sit in the relatively intimate amphitheatre in Verona and watch opera on balmy summer evenings. With a significantly larger capacity (at least 40,000), the refitted Colosseum could be the perfect venue for pop concerts. (Iglesias is currently top of Italy’s charts.) It would be a case of new arts funding the preservation of ancient ones.

The costs of old buildings are all too apparent in austerity Italy, where private investors foot restoration bills in return for advertising. The Ducal Palace in Venice was undergoing reconstruction in 2011 when I witnessed it enwrapped with billboards for Mario Testino. The Colosseum itself is currently undergoing a dramatic period of cleaning and fixing, paid for by Italian leather brand Tod’s.

Drawing on the booming fashion industry to preserve the country’s artistic heritage is an excellent means to an end. The restoration of the Colosseum stage, on the other hand, seems more like the beginning of the end.

In its current state, the amphitheatre is at once vast and cave-like with its subterranean walls, haunting enough to evoke the Romans’ beloved blood-sports. To experience the contrast between the expectant spectators and the slaves summoned to ‘perform’, you need only cast your eye between the sun-bleached seats stretching into the sky, and the dark shadows in the arena’s bowels below. Daniele Manacorda, the archaeologist who suggested covering these bowels with a stage, is said to envisage people visiting them underground. But as soon as you lose the cross-section view of the monument, you lose the view of the cross-sections which divided Roman society. The monument should not be preserved at the expense of its spirit.

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