Greed and folly

The Italian parliament has declined to ratify a decree by the Monti administration that parliamentary salaries are reduced to the European average.

The reason given is the technical one that a decree cannot be issued on what is purely the business of the chamber, but stopping it is a bad mistake and will seem like an excuse. The whole world now can see that Mario Monti's power is subject to the whim of parliament. This was a money saving measure (although that is not its real importance) and they have, effectively, denied a part of his budget and could deny other parts. The markets are not blind.

Secondly the Italian people despise the venality of their leaders who are given pay, pensions and perks far in excess of what an ordinary person could even aspire to (a basic salary of €168,000 to begin with). The political elite either doesn't know, or doesn't care how unpopular it is.

As Burns wrote 'O would some power the giftie gie us, to see ourselves as others see us.'

That veto

There's a whole range of opinion in the press this morning about David Cameron's veto, from 'Now we no longer have a seat at the top table' to 'At last we have stood up to the euro-bullies'.

To be honest, the going of separate ways has been looming for years. It was obvious that Britain had no intention of participating in the euro and in the supranational bodies which they now deem necessary, and, as a large country, we don't like to see the whole thing stitched up by France and Germany. The UK could have nodded through a treaty we didn't agree with, but there would then be pressure on us to put our money where our mouth is, and in any case, nodding through something we didn't like in the cause of European integration was what we did last time, and the time before and the time before that.

I think history will see this moment as both sides accepting what should have been perfectly obvious from the start.

It is going to be a bit messy, though: Britain will be on to the lawyers regularly if it sees the 17 poking their noses into what is the business of the 27 (tax harmonisation, for example) or if it sees them use the 27's resources - eg the European Commission - for their private business.

In the meantime the changes announced to not constitute a saving of the euro, either in the short term where a huge rescue operation has to be prepared in case Italy and Spain no longer have access to the debt markets, nor in the longer term, where they must even up  the competitiveness of individual members, to stop the same crisis happening again in the next few years.

That is where the real work has to be done.

Merkozy pick a fight

Oddly enough, despite all the talk over the years of Britain ‘wielding the handbag’ over Europe, and always being isolated, David Cameron’s recent nolle prosequi is the first time we have used the veto. It is to Cameron’s credit that he had the courage to do so – his civil servants, euro-fanatics all, will have advised him not to – and he will have earned credit with his party, something he can use right now.

But the background, and the implications, are more complicated.

Sarkozy always wanted a decision taken among the 17 of the Eurozone, not among the EU as a whole, and got his way with Merkel. Merkozy, as they are called, presented a bare threat to Cameron concerning the regulation of the City of London, which they knew he could not accept, forcing him, I suspect against his will, to opt out. And they were right: if he had gone back to England without even protection for our largest industry he would probably have lost his job.

The implications are interesting. Tory MPs are scenting blood, and pointing out, correctly, that because the Eurozone countries can force majority decisions on the rest of Europe, it is time to reassess our relationship. At the same time, if Cameron goes too far on this it will break up his coalition.

So we could find ourselves come next Spring with a general election, in which I suspect Cameron could achieve a serious working majority: he just needs to play the independence card which goes down well with the country. The Liberal Democrats would be annihilated and the UK Independence Party would seem largely irrelevant. Labour have neither the money nor the credible policies to fight a serous campaign.

So Cameron could find himself, without ever having wanted it, as a committed anti-EU operator. Merkozy will have picked a fight when they really didn’t need to.

US Republican Primaries

He won't win, but it would at least be something different for America:



I'll say it again: Ron Paul is the only one of these sorry losers who would be good for America, and might, just might, return it to its former status.

But they won't. They won't change, they won't choose him, they won't see reality.

It hurts me more than it hurts you

Elsa Fornero, Minister for Welfare in Mario Monti's 'technocrat' government, has burst into tears while making an announcement on pensions. A university lecturer in normal life, Ms Fornero was explaining that there would no longer be inflation adjustment for pensions worth more than €1,000 per month. As she was trying to mouth the word 'sacrifices' it all became too much.

Way to go, Elsa, as our American cousins would say.

I'm afraid even worse things than this are going to happen in Italy, and elsewhere, and we desperately need people who can exhibit real pain in public. I always think George Osborne's 'we're all in this together' doesn't seem to carry sufficient conviction. He needs to get in touch with Ms Fornero and discover the technique, be it the onion, the ammonia or the vaseline round the eyes.

There is a sort of suffering-chic coming into play in European politics and someone - Silvio Berlusconi would have been ideal but I suggest the well-fed José Manuel Barroso of the European Commission - needs to offer up something really ghastly for the public's delight, such as the need to sacrifice the young first-born, and burn their emaciated bodies for soap, while beating his breast and hitting his head on the laquered rococo table.

Only then will we feel our political class is suffering enough.

The mark of Cain

The American presidential race and the party primaries leading up to it constitute an endless fascination for me, like a freak show coming to town every four years. At the moment it is the Republican race and it is full of interest. Rick Perry, the front runner, suddenly forgot his own policies and is sunk. Mitt Romney, the current front runner, seems like an empty vessel, a rictus grin on a head devoid even of the intelligence needed to run a market stall.

Another leading contender is Newt Gingrich who, Americans have presumably forgotten, was fined $300,000 for making a misleading tax declaration, and who in 1998 presided over the worst mid-term performance of any party since the war.

Now Herman Cain steals the spotlight. A stream of women have claimed he sexually harassed them, and now another woman claims to have had a thirteen year affair, which Cain has denied but made no effort to disprove. Last night it all came to a head and he resigned his bid for the candidature.

Each time there seems to be someone who forgets that in running for President they will be subject to media scrutiny, some of it hostile. What sort of person with skeletons in his closet would be daft enough even to attempt a run? But they do. Someone always thinks he can cheat on his wife and nobody will know. Remember Gary Hart? John Edwards?

Addio Herman.

Next!

A Summit! The Grand Bargain arrives!

What’s happening next week? You’ll never guess, so I am going to tell you. There’s going to be a euro-summit. Yes.

Obviously if you are a chef or a gourmet eurocrat you probably can’t contain your enthusiasm, but some of the rest of us are finding our palates a little jaded.

The story is being put out that they are near to a deal on saving the euro, and that will certainly please the markets. Indeed we all have an interest in the current turmoil abating. The agreement is being called The Grand Bargain.

However it would be wrong not to sound a small note of caution. The proposed plan will be, as it was always going to, a synthesis between the French and German positions. That is to say that the French want the weaker countries to be bailed out, and the Germans are worried about moral hazard: that they will spend their money and it wil just encourage the naughty children to misbehave again. Angela Merkel wants a legal framework, giving the Brussels budgetary office the right to inspect the budgets before they are put to national parliaments (you will remember that the Irish Prime Minister was found asking permission of the Germans for his December budget before announcing it to his MPs). The European Court of Justice would enforce budgetary discipline.

But there are implications of this: the first is that some countries might not like the idea. New found democracies tend to guard their independence rather carefully. And of course the German parliament and constitutional court might still find the terms over-generous. And it will take some time to amend the treaties, during which it is the nature of euro-negotiation to descend to the level of the pork barrel. Mr. Cameron’s MPs want him to demand repatriation of some powers before agreeing to a deal.

Another problem is that whilst the payments imbalances are serious, they are in some respects only the symptoms, not the disease. The reason Italy and Greece are in trouble is that they have not modernised their economies and are still hopelessly inefficient. It is thought that, since the introduction of the euro, Italy’s competitiveness has fallen with respect to Germany’s by 50%. Suppose that Italy doesn’t reform its labour .laws, or that in order to get the budgetary measures through it gives out some more generous rights to trade unionists (already it is almost impossible to lay off Italian workers). Would the Brussels commissioners have authority over that, being able to forbid country-specific labour laws? Or regulate anything which affected productivity, such as education? How will other nations react to that?

The further we get down this path, the further, it seems, that we still have to go.

Idiots

As you may have heard, the car show presenter Jeremy Clarkson has said the wrong thing on a BBC TV programme.

This of course is nothing new. Clarkson has ranted against gays, cyclists, women drivers, people from Liverpool, all manner of minorities. He does it, not to offend, but to draw attention to himself, something he does rather well. He is famous all over the world.

When the above happened (you will recall we are getting towards Christmas and many celebrities have DVDs coming out; Clarkson has two) the self-righteous Guardian newspaper ideotically demanded an apology, as if in a conspiracy to make him more money. Since then, 21,000 people have complained to the BBC.

It makes me want to slap each and every 21,000 of them

LIGHTEN UP!

PS I am indebted to Heresy Corner for the statement by Dave Prentis, General Secretary of the UNISON union which includes this jaw-dropping drivel: 'The One Show is broadcast at a time when children are watching - they could have been scared and upset by his aggressive statements. An apology is not enough...Whilst he is driving around in fast cars for a living, public sector workers are busy holding our society together... they deserve all our thanks...'

Good grief.

GOOD GRIEF!

What could be wrong?

So, years after the crisis started, Angela Merkel comes out with her solution.

It's that countries in the Eurozone should submit their budgets to .. er .. the Eurozone and they would be told what they could and couldn't have, and that would be the law for these countries and it would be enforced by the European Court of Justice.

What could be wrong with that?

OK, countries which, stupidly, guarded their independence, particularly when they hadn't been independent for long, like Ireland, the Czech Republic, Slovakia, Poland, would see their ability to make independent decisions taken away from them, but, hey, it's only democracy, and who could possibly have any objection to giving up their democracy for a German political zone?

No, I think it should go OK.

The consequences of inaction

Extraordinary goings on in the financial markets. It would appear that several European banks were unlikely to be able to roll over their US$ short-term debt, and no procedure existed in the Eurozone to help. Accordingly a group of central banks, led by the US Federal Reserve, guaranteed the $ / € swap needed to prevent the contagion spreading all over the world.

If this is true, as unfortunately seems likely, it is a damning indictment of the indecision, incompetence and poor planning of the Euro-financial system. It is said that we get the politicians we deserve but I can't believe anyone deserves this lot.

Bailed out by les Anglo-Sassons.

Autumn Quiz

Q All these people lost their jobs this year. Apart from that what have they got in common? Zine ben-Ali, Hosni Mubarak, Muammar Gadaffi, Ali Abdulla Saleh, Silvio Berlusconi, Giorgios Papandreou.

A Nothing. The first four lost their jobs in attempts to impose democracy, the other two lost theirs in attempts to get rid of democracy.

Autumn to winter

Chancellor of the Exchequer Gideon 'George' Osborne presented his Autumn Statement today, which was more interesting in the background than the content. Growth forecasts have been downgraded from 1.7% this year and 2.5% next year to 0.9% this year and 0.7% next year. The previous forecasts, whilst credible at the time, seemed to err towards optimism and now we are getting the raw, unpleasant facts.

The problem is that the nation's economic strategy relied heavily on growth to reduce the deficit: as has often been mentioned in this blog, there are no cuts as such.

The upshot is to delay Osborne's plans by two years. Barring other disasters - and there may be many - the economy will look to be in good shape by 2017, but there has to be an election by 2015, which will now be fought on the Conservative side in the context of continuing economic pain. Britain is likely to avoid recession - which is defined as two successive quarters of negative growth - but not by much. Against that, it is likely that the Eurozone is already in recession.

On the one hand, Osborne is unlucky: neither he nor anyone else could have predicted the appalling economic mismanagement conducted by Merkel and Sarkozy which, coupled with a heavy dose of incompetence from America and Japan's economic model still failing, has brought much of western capitalism to its knees. Osborne's plans might have worked, now they are subject to ridicule.

On the other hand the Chancellor (isn't it about time we called him the Finance Minister? The whole thing desperately needs a more modern image) - on the other hand he is lucky in his enemies. The British people have accepted the need for belt tightening and do not believe those, such as the felicitously named Mr Balls, who say we could have it easier. If it isn't hurting it isn't working.

I am reminded of H.L.Mencken's dictum: 'Democracy is the theory that the common people know what they want, and deserve to get it, good and hard.'

Osborne's other measures were a raft of Government initiatives, such as more spending on railways, ideologically unsound and leaving the Government open to suggestions that it should have done more of this and earlier. Fortunately, Osborne has very little room for manoeuvre and these are not large enough to cause any lasting damage. Far better would have been to opt out of swathes of legislation coming from Brussels, an earlier rise in the pension age - 2026 is too far away to make much difference - and a reduction in corporation tax. Better than that would have been to identify whole areas of life in Britain in which the government shouldn't be involved at all. At least they are keeping a cap on public sector wages, which is something for the tribunes of the people to think about when they take tomorrow off.

Politically, the thing for Osborne to do now is keep his head below the parapet. I suggest spending more time at Euro-meetings, if his waistline can tolerate it, returning every so often to say we aren't doing quite as badly as them.

December is coming

Wolfgang Munchau, the FT columnist, who has moved from pro-euro fanaticism to pronounced scepticism as reality has slowly dawned, now reckons the Eurozone has until 9th December to save itself, with a mixture of measures which essentially mean Germany guaranteeing everyone else.

9th December is the day of the big euro-summit, and on this day Croatia is set to join. Yes, whilst it must seem incredible that anyone wants to join this mess just as it is breaking up (the rules say new applicants must promise to adopt the euro), our unelected rulers are still pursuing their policy of enlarging and deepening. For the Croats, the Prime Minister, Jadranka Kosor, has said that the country is guaranteed to receive €3.5bn in subsidies in the first two years alone. We had to bribe them to come in.

Croatia's unemployment is at 14%, its external debt is more than 100% of GDP, the ruling party is likely to lose the election a few days before the accession deal is signed, and the government is riddled with corruption. The similarities with Greece are alarming for any normal person.

But none of this bothers the Euro-loonies. Quite unaware that there could be anything wrong with the euro-template, they proceed as if everything were normal.

Latest news from the Madhouse

They are all talking in the Eurozone - that's what they do best, other than eating - and the signs are not good. France and the other nations want the European Central Bank to assume responsibility for the crisis - that means, effectively, Germany guaranteeing the debts of the weakest nations - and Germany is, unsurprisingly, not enthusiastic.

Now there are the first signs of the market not much liking Germany either. Yesterday (Wed 23rd) Germany tried to raise €6bn of 10 year debt and there were few takers. Just €3.6bn were sold. This is pretty well unheard of, and puts France's bailout strategy into perspective: ECB bonds or guaranteed paper issued by the EFSF bailout fund, cannot be more creditworthy than German debt - Germany is the best economy in Europe. But the markets are turning up their noses at German Bunds: growth is falling in Germany. This doesn't bode well. Stephanie Flanders of the BBC, an organisation which will stretch credibility to support the euro, says

"In my conversations with analysts, traders and officials I'm finding more and more of them are talking about the end game for the euro"

It must, surely, be getting to the stage where solvent countries realise it would cost less to bail out their own banks who have lent to the insolvent countries, than it would to  bail out the creditors themselves. Equally, the indebted nations must be starting to realise that they are going to be shafted by Germany and France, and it might just as well be at a time of their own choosing.

Cairo

The disturbances in Cairo - they do not yet seem to have spread to the rest of the country - are at the same time confusing, disturbing and cause for hope.

We read that the protesters - again occupying Tahrir Square as in the successful protests at the beginning of the year which ousted Mubarak - want quicker change, but at the same time want to cancel the elections held for Monday, which had supposed to be held in September. It seems that they have no trust in the election procedures, but, more importantly, are concerned about the role of the military after the parliament has been elected. They want an unconditional confirmation from the generals that military rule will end as soon as the deputies are in office.

Where this is disturbing is that it is difficult for a heterogeneous group to portray, en masse, such a complicated thought process. The generals might publicly conclude that the people are not ready to rule themselves: indeed that appears to be the stance adopted at the moment. The USA, Britain and other countries, including the ineffective Arab League, must push for elections to be held in due course with independent verification of their independence.

Where there is cause for hope is that the Army now knows that the people are on their case, and that they will risk bloodshed for democracy.

Syria

You could easily imagine Messrs. Cameron and Sarkozy licking their lips when violence flared up in Syria. Fortunately they will not be allowed to take military action through the UN because Russia and China are furious at the way they exceeded their UN mandate in Libya, which was for the protection of the people not for the pursuit of Gadaffi.

Whilst the Libyan escapade was given UN approval in part due to the inclusion of the Arab League, with Syria the League has been left on its own. And what a mess it has made. It secured Bashar al-Assad's agreement to stop slaughtering his own people, only for Assad to ignore this the following day. It has tried several times to get some meaningful peace plan together but to no avail: Assad is fighting for his life - and not just his political life - and isn't going to give an inch.

All we can hope for is that sanctions by the West starve the people into desperate measures against their ruler.

A sad business.

At least someone's saying it

Nigel Farage at the European Parliament

Libya and the foreign busybodies

Following the arrest of Col. Gaddafi's favourite son, Saif-al-Islam, a rather curious thing happened. Someone from the International Criminal Court in The Hague flew down to Libya to ask if he could be tried there.

Now, there is a case, where a new nation hasn't got its institutions together, for criminals to be tried elsewhere, although not much of a case, in my view. But the whole purpose of our intervention in Libya was to make it a cohesive nation, to stop one part attacking its own side, and to build the blocks of a proper state with laws, justice and so on. you would have thought that Libya was in a good position to hold a trial.

Instead we have a curious system of an international body bidding for the ability to put someone on trial. Why? Why are we paying for Libya to be a proper nation based on the rules of law, and at the same time paying for another body to tell them they aren't capable of holding a trial which that body deems important? Have the ICC been trying to involve themselves in Burma, Zimbabwe, China? No.

Saif-al-Islam should receive a proper trial according to the laws of the country where he was born, lived and committed his alleged crimes,

The sooner this bogus international body is closed down the better.

Spain: not at the crossroads, nothing to see

Spain goes to the polls today, a little reluctant and without, it would appear, much in the way of hope. A curious feature of the elections is that, rather like the last ones, they don't seem to be offering the voter any choice about Spain itself.

Until 2004 the Prime Minister had been José Maria Aznar, who was coming to the end of a second 4 year term. You may recall the fiasco over the Madrid train bombing, which happened just a couple of days before the 2004 election. Aznar claimed it was the work of Basque terrorists (the Basque ETA group had tried to assassinate him at least once) whereas the atrocity was in fact committed by an Islamist terror group, as a protest against Spain's involvement in the Iraq war.

On the back of this Aznar's party lost the 2004 elections, bringing José Luis Zapatero to power. Following their re-election in 2008 Zapatero was burned out and this election  will be between two men not previously in the front line: neither of whom seems to be much loved by the electorate. The disappointed Spanish believe that there is little difference between the two on the most important topic, austerity measures, and that they probably both have to toe the Merkel-line anyway.

Nothing much to see here.

Monti makes a start

Mario Monti has got record levels of approval  from both houses of parliament for his cabinet of academics, and discussion is now turning to what he will do and how long the administration will last.

As to the first, he has said he will be making demands on those who have given least. It would be an extremely popular (as well as populist) gesture if he reduced salaries for MPs, but they are such a venal lot that even in the present climate I don't think it would get through. I haven't been able to find anyone who has heard of the new cabinet members. It may be worth recording that they almost all come from the university system, and that whilst Britain has three universities in the world top ten, Italy doesn't have one in the top 300. But it would be unfair to prejudge given the fact that I'd never heard of any of them, either.

As to how long the 'technical' government will last, Monti has said it should last until the due date for elections, that is to say 15 months, whilst Berlusconi has reminded everyone it is not a democratic government and that it will last as long as the elected politicians want it to. In fact it is quite convenient for a populist politician that the difficult decisions are implemented by an outsider. If it goes wrong he will say 'I told you so' and if it goes right he will return to power and claim the credit.

Monti is off to see Merkel and Sarkozy and the rest of the Euro-gang next week, and he will be welcomed with open arms. He is, after all, one of them.

Ireland and the death of European democracy

Speaking of things appearing to happen before they in fact do (see below: this blog has the earlier posts shown later - oh, never mind) but speaking of that, the Irish Taoiseach Enda Kenny went to see Angela Merkel the other day and, would you believe it, next month's Irish budget is published in Germany more than a fortnight before it is due to be discussed in the Irish Parliament. Reuters reports the details having been given to the German Parliament's budget committee, and that they include a rise in VAT.

So now the European establishment is running Greece, Italy, Ireland and to those we can add Belgium which still doesn't have an elected government. Don't think so? Let's see if we can answer two questions: first, would the rescue plans have continued if, say, the Italian President had nominated a caretaker government headed by someone who didn't have the 'correct' view of the euro?

Second, before being offered a bailout, were these countries told it would spell the end of their democracy, so that they could at least hold a referendum?

This is a bad time for Europe: not since the 1940s have we seen formerly independent countries run by foreign delegates.

Those pesky particles

It seems they've done it again - checking their previous experiment it appears that scientists in Italy have again made a neutrino - or lots of them, who's counting? - go faster than light. A neutrino - of course you knew this - is like an electron but without the electric charge, a sort of 'ron'.

I'm sure this is all frightfully important but it seems to me to have its comic side. A scientist on BBC Radio this morning said they were going to test it by sending neutrinos from Chicago up towards the Canadian border. 'Some of them', presumably referring to the less discerning neutrinos, 'just keep on going.'

This raises all kinds of questions about time travel. Sorry if you've heard that one before. 'Which one?' you ask. Come along, we're now supposed to be able to see things before they happen.

'We don't serve neutrinos here'

A neutrino walks into a bar.

All for one....

Le Figaro reports that France is against the idea of a directly-elected President of the European Commission, because Germany, having more people, would have a better chance of their candidate winning.

It is like the Monster Raving Loony Party complaining that UK elections were unfair because the other parties had more supporters.

Further evidence that these guys really, really, don't like democracy.

Still, good to see them all pulling selflessly together towards the European utopia.

The EU and your taxes

Most people don't have a problem with EU rules on not subsidising favoured industries, in fact it is one of the few worthwhile bits of the Single Market. If, to draw a nationality at random, the French want to subsidise their pharmaceuticals companies, they are not allowed to because it gives an unfair advantage over other European pharma companies.

Now have a look at what is happening in Gibraltar. The new finance measures involve eliminating profits taxes on offshore companies: that is to say that profits taxes are only charged on companies actually working in Gibraltar with employees there (the offshore companies have to pay other charges and these are presumably enough).

The European Commission have decreed that this is in effect a subsidy.

So not charging taxes amounts to a subsidy. How much tax would you have to pay before it wasn't a subsidy? You will remember that the French have tried to ban Ireland from having a low corporation tax rate in order to attract businesses and jobs. In a sense that was understandable (although wrong) because Ireland was being bailed out by, in part, the French.

But Gibraltar is not in receipt of such handouts. Why shouldn't it be able to set its own tax rates? 

The answer is that Spain, which is next to Gibraltar, has received the assurance, in return for something else, that the EU will oppose this (Spain doesn't want companies finding it cheaper to set up on the southern tip of the peninsula). That is the grubby way the EU works: secret backroom deals favouring the bully boys.

The right to kill (yourself)

The British Medical Association wants to ban you smoking in your own car.

Since the passing of the Suicide Act in the1960s it has been legal for me to get a knife and slit my throat, or to jump off a cliff. The two ways I cannot kill myself are going through the windscreen of my car (because the busybodies make me wear a seat belt) and, increasingly, smoking. They say that the second hand smoke is dangerous, but of course if I am smoking in my car I am treating myself to first hand smoke and so won't be worried about that.

In fact the 'debate' on smoking in public places reached the low point of British science. They said second hand smoke was dangerous, without specifying how much of it was dangerous, how much the risk was reduced if the room was well ventilated, or, if a large room, how much the risk changed by proximity or otherwise to the smoker. They didn't give any of this data, essential to forming a view on the subject, either because they didn't know or because it was unsuitable for their position in the argument.

They just don't want you to smoke. Some of them say it is because the National Health Service has to treat you, but if that were the problem we would have banned homosexuality because gays are more likely to get AIDS. No, it is just bigotry: they want you to conform to what they do.

Supertask for Supermario

Mario Monti, as the whole world knows, is now Prime Minister, but rather than, as one commentator said, being 'put in as the head of the government', he has not yet formed his administration. Today, Monday and tomorrow, Tuesday, will be taken up with getting the views and agreements of both sides. Theoretically, there could still be an election, but nobody wants that (except the people, of course). We don't yet know to what extent there will be politicians (who would be opposed by the other side and therefore have to be balanced out) or just technocrats. Fortunately for Monti two of the senior players, Alfano and Bersani, favour just technocrats. In this context it is believed that Monti would choose university professors. This is not quite as good as it may sound - there is a world of difference between teaching it and doing it and the professors are themselves sometimes political operatives.

Mario Monti

What will Monti do? Imagine Italy were a person, in trouble with his debts. If he isn't to go into bankruptcy, or default, he has to do a number of things.

First, he has to stop borrowing more and more.This means cutting out some expenditure, and it is this which the Europe-inspired austerity plan sought to address. It is worth noting that before Berlusconi fell from grace, Ollie Rehn, the budget commissioner, said that the proposals were not enough. But suppose they were just enough - maybe to balance the budget by 2014 instead of 2013 and that were acceptable - there is then the problem of putting the plan into operation. I have said before that there is no real appetite for austerity in Italy and the people, for all that Europe hopes to bypass them, could cut up rough. Level of difficulty: 6/10.

Next our over-borrowed man needs a little bit of cash to tide him over - particularly for paying the interest on his debts. In Italy's case this liquidity loan (I am not talking about refinancing all its debts) would be around €750 billion, it is estimated. Who's got that kind of money? It's a lot, even for the Chinese. The European Central Bank, that's who (it can print it). But Germany, you may remember, is against the ECB chipping in, saying it is against its Constitution. It would create a core inflation all over Europe. So getting something to tide Italy over may be as difficult as refinancing everything. Level of difficulty 8/10.

Last we need to make sure our man doesn't get into this state again. Since the start of the euro Italy's labour competitiveness has deteriorated by 50% vis-a-vis Germany. On the face of it this means either the Italians need to work for half pay, or they work twice as hard as Germans. Neither of these is remotely possible. But changes can be made. The State is too big in Italy and that means not just that it needs to be financed, it means it interferes in all kinds of areas where it shouldn't. Opening even a shop is a nightmare, you have to register with all kinds of bodies and jump through all kinds of hoops. If you employ more than 15 workers it is impossible to lay some off when business is slow. Trade Unions are entrenched in society and in the law and are far too powerful. And speaking of the law, if you have even a modest trade dispute it is likely to take at least five years to resolve it through the  courts - most people don't bother trying. Even if Monti managed to get agreement to all this, the effect would be of rendering unemployed more than a million State workers, which would push the country into recession which means a bigger overdraft (see above). It would take years to re-employ them in the productive sector (think Britain in the 1980s). Level of difficulty 9/10.

Monti - even if he were Supermario - can't do all this. All he can do, reasonably, is put into place Silvio's commitments to Brussels. Then Silvio, or his PdL party, will say 'that is what we were going to do'. Elections will almost certainly have to be held in 2013 if not earlier, and the PdL is fairly confident it can win them.

The solution to Italy's problems looks increasingly like default, leaving the euro and allowing a massive devaluation, and at the same time putting into place the efficiency measures. It's going to be a bad couple of years.

The clown leaves the ring

So, he's gone. Yesterday there were tears from his supporters and jubilant celebration from his detractors: Silvio Berlusconi polarised opinion like few other politicians.

The press will miss him: despite being almost universally critical, they know that other politicians can never be as colourful. You cannot imagine Chancellor Merkel holding a bunga bunga party, or David Cameron bluffing an underage prostitute out of jail by saying she was the granddaughter of the President of Egypt. Mario Monti, if he is the chosen successor, will never practice the rabbit-out-of-the-hat politics which caused a world summit to be convened in the rubble of l'Aquila and nearly built the Messina bridge.

As things get more difficult in Italy, and they will, the Italians are going to find him a very useful scapegoat. They may forget that it was not Berlusconi who piled the debt up to unmanageable levels: that was done long before, and it seemed, for a while, that Italy could manage them. And the people will find it useful to forget that whilst they publicly crave stability, before Berlusconi Italy had averaged more than one government a year since the war. They may forget, while shouting 'mafioso' as he went to see the President, that under his government there was more success against organised crime than ever before. And they may forget that, unlike his predecessors, he did not have his hand in the till. Silvio didn't want money, he wanted protection from his accusers and he wanted to be loved.

A statesman would have seen what was coming (how many did?) and warned his people that it was the end of the line for the way of life they had espoused, that tough measures would have to be taken to get them through the troubled waters ahead but that his steady hand on the tiller would guide them to safety.

But Silvio wasn't a statesman: he was an actor who stumbled, grinning, on to the world stage and had not learned his lines.

11th November

We now have more young war veterans than we have had for generations. They reintegrate badly into society and the Poppy Fund helps. Do give.

We have withdrawn from Libya but are still in Afghanistan. The Government is spear-waving in Syria and wondering what to do about Iran.

Things really don't look that good.

More news from the madhouse

Greece has a new Prime Minister. The man who drew the short straw was Lucas Papademos, a former governor of the European Central Bank, who will presumably command some confidence in Europe. They didn’t like Papandreou because he showed signs of dabbling dangerously with democracy.

In Italy the talk in the press and in the bars is that it is a done deal that Mario Monti – recently appointed a senator for life – will head up a new technical government. Monti is famous firstly for his researches in the 1970s into banks operating under monopoly conditions and secondly for having a fairly successful stint as competition commissioner in Brussels. Berlusconi seems to be accepting Monti although his partner Umberto Bossi seems to want elections. As of this morning Berlusconi is still there.

By the end of next week there could be two countries in Europe with governments run by non-elected appointees who are former EU officials. The meeting of the Italian Senate Budget Committee was interrupted yesterday so they could consult with the EU Gauleiters officials who are in Rome.

France suffered a bit of embarrassment when Standard & Poors, the ratings agency, let it slip that it was downgrading the country’s debt, only to announce moments later that it was not. A cock-up, but a careless and dangerous one.

However France is being closely watched by the markets and the rates it has to pay compared to Germany are widening.

Both France and Germany are separately reported to be studying how a new, core Europe could emerge, but both vigorously deny it, lending the reports credibility.

Meanwhile Klaus Regling, a German who is head of the EFSF, the bailout fund, says they are having difficulty ratcheting it up to the desired level of €1 trillion (even though €2 trillion or more was what was required).

Lastly, prospects for European growth have been revised down from 1.8% to 0.5%, which means some countries will fall into recession.

And still they persist with the idea that everyone can have the same interest rate.

   

What now?

Well at least Silvio Berlusconi can tell his grandchildren that Italy’s borrowing costs actually rose when he announced his promised resignation. 'They suddenly realised they couldn't do without me' he will say.

The reason the markets weren't happy is that what happens now is anyone's guess. First, let's deal with the 7%, which is the maximum rate a country is supposed to be able to pay before it goes under. Why? What did we all do when base interest rates were 7% or more and countries had to pay a premium over that?

The answer is that in those days countries couldn't borrow as much. When these countries joined the euro and got to pay German interest rates it was assumed they would simply be wealthier on a net basis: that they would allow that extra wealth to trickle down to their citizens, letting them reduce taxes on wealth creation, creating a virtuous circle. Instead they chose to borrow more.

So the 'tipping point' is not an interest rate per se, it is what percentage of a country's income (GDP) goes on paying the banks. Some economists say that a figure of 20% is possible. So if a country borrows 100% of its GDP, it could pay an interest rate of 20% if it didn't have to repay anything. But of course each debt has a maturity and must at least be repaid and rolled over. Italy's average maturity isn't too bad at around 7 years (although Britain's is around twice that) so on its €1.9 trillion of debt, each year it has to come up with one seventh in repayments and 7% in interest, which comes to around 25% of GDP (the debt is 120% of  GDP).

The markets know Italy can pay the 7% for some time, but if it doesn't come up with that extra one seventh, it means default, and default on one debt is default on them all.

So can Italy live with having to come up with a quarter of its income on debt servicing? When I got my first job I spent half my income on rent. Everything is possible if you can cut expenditure to meet the available money. The problem in Italy is that there really isn't the will to cut. The middle classes have their vested interests, the poor think they have suffered enough already, and the rich think that only little people pay taxes. It is the job of a statesman to explain to the people how bad things really are, and to gain their confidence that, however bad the medicine may taste, it will make them better in the end. It is here that Berlusconi is culpable, more than the Bunga Bunga parties, more than the jokes, more than changing the law to keep himself out or prison. If he had explained eight years ago, when he came back to power, what needed to be done they would have trusted him to do it. But the showman didn't want to upset anyone.

One note of caution about the resignation, which will come into effect when Parliament has passed the budget. Does the draft legislation only cover the promises to Brussels? or are there any Berlusconi-isms, such as 'It will henceforth be illegal to say anything horrid, in court or out of it, about septuagenarian former Prime Ministers.' Perhaps I am being unfair and he will go quietly at the end of the week.

That, however, will not be the end of Italy's problems. It may be just the start of them.

On the out

John Taylor, the Conservative peer, is out of prison (this blog refuses to use his title; he is a criminal) although having to wear an electronic tag. He now proposes to go back into the House of Lords and claim his daily stipend.

Mercy.

I agree that when someone has served his punishment that should be the end of it but such a doctrine shouldn't apply to people making laws over us. The man is a fraudster. He fraudulently claimed expenses he wasn't entitled to, which we, the people, paid.

This system really does need shaking up. He comes out of the nick, expects to be called by the same word we give to the Almighty in Church, and helps make the law of the land.

And they wonder why people have no respect for our institutions.

A change for Italy?

Silvio Berlusconi has announced that he will resign when his austerity budget - the letter to the IMF with its promises of spending cuts and economic competitiveness - is passed into law.

Berlusconi has seemed like a fixture in office: Prime Minister for eight years out of the last ten and the only post war politician to hold the post for a full term. It is a measure of the man's tenacity that the first thing one thought on hearing the news was that it must be some sort of trick. Indeed, it does leave his opponents wit the problem of passing the measures, failing which, presumably, he would remain in power. And a promise might turn out to be a more flexible instrument than it sounds.

We shall see, but as I pointed out on the BBC yesterday, it doesn't really solve much: Italy still has exactly the same problems it had the day before, merely a political vacuum.

Oh, and by the way, he hasn't actually gone yet.

Sickening

I think most people will have been disgusted by the scenes outside a California courtroom, where people were whooping with joy that Michael Jackson's personal doctor, Conrad Murray, had been found guilty of the involuntary manslaughter of the singer.

Why the frenzied scenes? Several said that they were glad that 'justice had been done' but this is wide of the mark. Dr. Murray has been convicted of a crime which carries a maximum sentence of four years in prison, and these folk are not outside every courtroom in America celebrating the imprisonment of criminals.

Jackson was a drug addict, with all the grubby associations that holds. Most addicts can't afford to have a doctor present when they shoot up (the chief accusation against Murray was that he administered the drug and then left the room).

These people are fans of Michael Jackson who know he had feet of clay and that it is they who made him like that. They wish Conrad Murray had been found guilty of murder. It would have taken something off their consciences.

The end of Silvio?

As I write, on the afternoon of 7th November, there are rumours that Berlusconi is on the point of resigning, which would be a sad loss for political commentators everywhere.

I could be wrong, but I wonder if people are underestimating the man's tenacity.

Far from stories that the President will appoint a technical government, my understanding of the constitution is that Berlusconi would first have to lose a confidence vote, then elections would have to produce no clear result.

Kicking the Cannes down the road

Update from the madhouse

Nothing seems to have been agreed at the Cannes summit, even though you might have thought it was urgent.

One small change has been noticed by the Economist: several officials seem to have a badge marked 'Groupe de Francfort' which appears to be a loose structure of leaders, finance ministers and anyone they invite to their deliberations. More bureaucrats, still no result. The very fact that the whole thing was derailed by one member saying he wanted to consult his electorate is an indication of what sort of people we have here.

The anti-democrats immediately told Greece that the vote should be on whether they stay in the EU, even though it is not in fact necessary to be in the euro to be in the EU (Britain is an example). Then they told Italy to submit to IMF monitoring of its adherence to Berlusconi's 15 page letter presented to the previous meeting.

Both these countries, Greece and Italy, have now lost their democratic independence and are forced to be satellites of Germany.

And they say the EU is the guarantor of peace in Europe!

Hypocisy and protest

It is being said that the protesters outside St. Paul's Cathedral in London will now be allowed to stay until after Christmas. This is a curious tale: the protesters seem unable to articulate what they are protesting about, and must be reflecting now that their protest has caused a lot of damage to the Church of England and none whatsoever to the City of London.

There have been three resignations so far from the Chapter of St. Paul's, one of them saying that he could not condone violence against the protesters, even though no violence has been suggested or considered.

The truth of the matter is that they are in favour of the protests: the Church of England was long ago taken over by the political left, and the current crop of priests learned an almost Marxist philosophy at their seminaries. It is hard now to find anyone in the Church who talks about God or Christ.

One who does is the excellent Bishop of London Dr. Richard Chartres, who, although strangely he has no authority over the Dean and Chapter, has tried to inject some sense into the proceedings, something sadly lacking in the Archbishop of Canterbury, Rowan Williams, as well as the BBC (as noted earlier).

Dr. Williams wrote an article for the Financial Times. He is as strange a correspondent for them is the FT is as an outlet for his views. He offers little in the way of suggestions and much of the 'something must be done' line of thinking. 'Everyone has been able to be wise after the event and to pour scorn on the Cathedral in particular and the Church of England in general for failing to know how to square the circle of public interest and protest.'

Since when was the Church's role to square the circle of public interest and protest? It is not, or at least shouldn't be, a political body. And speaking of being wise after the event, the Church was fairly uncritical of the Blair / Brown administration which failed to regulate the banks properly. And when things were going well, did we ever hear Williams praise the financial world for providing cheap mortgages, loans to the needy and a successful economy bringing wealth to everyone? I don't think we did.

Let the Church of England look to its own failings. Attendance has been dropping steadily for years, indeed ever since it decided to be a politicised branch of the social services rather than curators of men's souls. People don't like this wishy-washy social liberalism and cannot support the Church while it is a blatantly political organisation supporting a creed which has now been discredited. It used to have a creed of its own.

'And why beholdest thou the mote that is in thy brother's eye and considerest not the beam that is in thine own eye?' I don't suppose they read the bible much nowadays.

Ask the people horror! Greece goes mad!

There is almost universal consternation in Europe at the decision of the Greek Prime Minister Papandreou to hold a referendum on the terms of the second bailout. Le Monde reports someone close to the French President as saying ‘Greece’s gesture is irrational and dangerous’.

Of course they don’t like democracy in the EU – it so often seems to interfere with their plans which as we know are for our own good. This blog, by contrast, does not find democracy irrational and dangerous and wishes the Greeks well.

Actually, it may well not go the wrong way for Europe. Papandreou is clearly fed up with being squeezed at one end by his people and at the other by his masters in Brussels and Frankfurt, and could well emerge with a mandate to go ahead. Polls suggest that whilst the people think the austerity measures are too harsh, they don’t want to leave the eurozone.

So what is good? The best thing would have been if Greece hadn’t joined the eurozone. The next best thing, for the Greeks at any rate, is if they had left in a controlled manner over a year ago. To appreciate what is going on it is vital to remember that the euro is first and foremost a political construct. Olli Rehn, the European Commissioner for Economic and Monetary Affairs said that they had known at the time that Greece’s financial statements were cooked up. They went ahead, you see, because they felt the politics were more important than the economics. The idea was that every crisis – and they had enough warnings, they knew there would be the odd crisis which would put the euro’s bindings under stress – every crisis would lead to gradual political integration.

And so it seemed to them at the start of this crisis. The German sense of discipline would slowly seep into the minds of the South, and, in return for help, the eurozone would move gradually towards a fiscal and political union, each member’s budget being approved by Brussels.

What they had not taken into account is that the peoples of this continent are genuinely different. Those in the south are less disciplined, less protestant than those in the north. And because of this the south is less efficient. So unless steps are taken to improve labour market regulation, remove the vested interests that are barriers to growth and make everyone pay their taxes there will be a widening gap between the olive belt and the protestant north. A bailout can only staunch the wound, not heal it.

Greece has years of relative inefficiency in its veins and this is not a problem which can be dealt with in a hurry. It needs, and Italy, Portugal and Spain also need, a devaluation of one sort or another. The Germans and the bureaucrats think it should be an internal devaluation: that is simply to make the people poorer with higher taxes and less welfare. Greece would be left in an overvalued currency and its exports would be uncompetitive. Not even the tourists would go. In Italy I see German tourists complain about how expensive everything is – not just Gucci handbags but food in the supermarket. This is because the food is priced to include Italian levels of efficiency with German currency values. Greece is the same only worse.

So in my view the Greeks ought to reject the bailout and improve or not improve their economy at their own pace. This would mean defaulting on all its debts, except that held by its citizens, which would be translated into the new drachma. If in time they were to choose to go into this experiment again, they should be free to do so.

Just a big number

In a week when, it is supposed, the 7 billionth person is born, it may be thought that we should be thinking something other than the usual topics of the Euro, the BBC and the clocks changing.

However it seems to be we are hearing quite enough of this already, the disaster-scenario monkeys going into overtime. These are the neo-Malthusians, who can't wait to pronounce disaster for the earth by overpopulation, which can only be cured by... by what, exactly?

Thomas Malthus was born in the 18th century, when there were far, far fewer people. His thesis was that production (of food) increased on an arithmetic scale, ie 2+2+2+2=8, whereas population increased on a geometric scale ie 2x2x2x2 =16. If there had been any truth whatsoever in his allegations the human race would have been wiped out by the time of his death in the 1830s. But instead we keep finding ways of increasing production, of which genetically engineered products may be the next wave.

Let's hear no more of this nonsense. This blog welcomes the 7 billionth baby and hope it grows up in a world without politicians, artificial currencies and the clocks changing.

Render unto Caesar

I am still trying to work out what the protesters in America and London want. It seems they don't really know, either.

It would be a much more effective protest if they bore a single message and repeated it, incessantly, in front of newspapers, TV News and the rest. Some are saying we shouldn't have a capitalist system, which is silly, and some are saying the capitalists have made a bit of a mess of it, which seems to be exhorting them to further efforts.

Several, filmed the other day outside St. Paul's Cathedral, had placards saying 'What would Jesus say?'

Well, if I remember rightly, he threw out of the Temple all the people who shouldn't have been there.

Time to stop it

Mistakenly getting up a little before 5am this morning because I had forgotten the Government's absurd practice of changing the clocks twice a year, I read that there has been a bill before Parliament to change the time two hours, that is to say GMT+1 in winter, GMT+2 in Summer, as it is in Berlin.

This could only have come from a completely crazed Europhile, and apparently the culprit was Rebecca Harris MP, a Conservative. This blog will be keeping an eye on her with a view to detention under Section 4 of the Mental Health Act. Under her system parts of Scotland would still be dark at 10am, just so we can enjoy the same time as Angela Merkel.

Why would you want to do this?

Ms Harris has of course been supported by the Liberal Democrats who lost their sense of reality years ago.

Only now has Cameron said that he will not support the bill.

Sometimes I think we are all quite, quite mad.

The BBC up to its old tricks

I once told a friend of mine, who works for the BBC, that the reason I criticise it is that I feel as if I own it and care for it. There are two problems with the organisation. The first is that it is far, far too big. One or two TV channels, one or two radio channels, its excellent news service put out on multiple formats and that would be enough.

The other problem is its bias, which really must be addressed.

Two examples, taken at the same time on two separate days. There are others.

Yesterday on the Today radio programme, Evan Davis introduced a piece on Directors’ pay (in the news that day). Guess what the BBC line is on this – impartial and feeling it is a matter for the owners of the company? No, you are harking back to the days of Lord Reith. They gathered together two people who agreed it was too high and, just in case either of them differed from the BBC line, the presenter, Evan Davis framed his questions at such length that they could hardly get a word in edgeways. These were effectively short speeches to which he invited the contributors to agree.

Today, at around the same time, Jim Naughtie, who to be fair is known to have left-wing sympathies, I just don’t understand how he is allowed to present a news programme, did a piece on the protesters who forced the closure of St Paul’s Cathedral for the first time since the war. He gathered together two people who thought, extraordinarily, that the Church of England should be involved in the purely political matter of the worth of the City of London, and again pronounced the BBC line, inviting them to agree. They did, of course.

These two pieces were presented as impartial comment. They are two egregious examples, and you can see and hear them every day, of appalling, politically motivated journalism. People complain about the American Fox News being biased to the Right Wing but this is exactly the same coming from the other direction, and at least Fox doesn’t pretend to be anything other than it is.

It is not the function of the taxpayer-funded broadcaster to disseminate left-wing  opinion. For years it has advertised positions only in the left-wing Guardian newspaper and we are now suffering from the results.

Another malevolent ‘line’ from the BBC is its support for, indeed almost complete lack of criticism of, the European Union. This topic is highly relevant now, in that (a) it seems to be falling apart and (b) a large number of MPs, to say nothing of a majority of the people, want us to leave the EU. What sort of debate do you think the BBC is going to offer when its Chairman and his deputy have both often mouthed their contempt for anyone who even criticises the EU?

It is with great regret that I say this, but I am coming to the conclusion that unless things change dramatically in this organisation, we are going to be forced to get rid of a wonderful institution, rooted in, but no longer supporting, a superb set of ideals. But what else can we do?

We can't let it go on.

Maserati outrage

It’s an outrage, cried Ignazio la Russa, Italian Defence Minister. He was referring to the question, posed by Emanuele Fiano of the usually silent Democratic Party, as to whether it was appropriate in the economic circumstances for the staff of the defence ministry to take delivery of 19 armoured Maserati cars. In their basic form these cars cost more than £80,000 but we are talking about a fair bit more for the bullet-proofing and so on. I remember when these cars came out that the then President, Carlo Azeglio Ciampi, took delivery of one and said what a luxury it was. Now they are available to mere officials.

Ignazio La Russa

La Russa, in his fury at finding his absurd largesse with other people’s money criticised, pointed out that Maseratis were an Italian brand (he forgot that so were FIAT 500s and a nice range of scooters).

At the same time we learn that the French President has taken delivery of a aeroplane costing €300 million. At least the aircraft itself only cost €50 million, the rest being ‘optional extras’. If you’ll excuse me I am just going to repeat that. The aircraft cost €50m, and there were €250m of extras.

What these two examples, shocking in their own ways (the Maseratis aren’t the only government cars in Italy, there are 300,000 of those, yes, 300,000) is the liberties the political class take with our money.

Why do they do it? Two reasons. One is because they have an inflated sense of their own importance, normal with this type of person but brought down to earth by democracy (the French President has enormous unchecked powers, perhaps more than any individual in the world, but at least he can be got rid of, and indeed, may well be). None of these new Maserati class, of course, have been elected.

The second reason is that they are too often unchallenged by the press and the people.

We see the stirrings of change now in Italy. I do hope that will continue.

A deal!

Well, there's a deal, and the markets have rejoiced. I confess I didn't think they'd do it in time. Some time ago I wrote 'the only people who can't see that Greece will default are the people who matter' and now they have seen it. The 'haircut' is 50% which may not be quite as much as it should be, and may be less when the technical calculations come out, but they have recognised that there should be a haircut.

The leveraging of the EFSF, again, is not as much as people wanted, at around $1 trillion. The markets wanted a 'big bazooka' but it is at least a small one. The increase will not be underwritten by the European Central Bank, which many wanted.

Lastly, the recapitalisation of the banks is simply a recognition that Greece isn't going to pay and in the future some others might not, either. Of course banks have to write down their investments to their market value.

So where are we now? Although the Italian set of promises included a provision to make it cheaper to lay workers off, there is little or no addressing of the fundamental issue here: that Southern European economies are less efficient than northern ones. The Germans simply seem to be saying that they should live within their means. But this will not work: if we are not to have a similar crisis in a year or two they must change even their labour laws.

Again the fundamental problem is simple and well known. Many of us said when the euro was formed that a currency union would not work without a political union. Britain could never join a political union and was wise to stay out but the others have implicitly agreed to it. What will happen when, say, the Italians get a letter from a financial President (for, yes, one is envisaged) that they have to adjust their trade union legislation, we can only surmise.

But they have done fairly well. The dogs are at least staved off. For a bit.

News from the madhouse 26th October

It's Wednesday, which means it must be final summit day!

Yes, I know, that was 21st July, and then they all went on holiday and then at the beginning of October they said they had reached an agreement but they weren't going to tell us what it was for 3 weeks and then the final summit was last weekend but in the end they couldn't come to an agreement so it was going to be today, Wednesday 26th October.

Today Chancellor Merkel was due to take the complex agreement, Greece bailout, bank bailouts, contingency fund to protect Italy and Spain, to the German Parliament, get it approved then fly back to Brussels to sign off and have dinner.

But no, it looks as if it is all too much and the next final solution development will be 7th November. Speaking of final solutions, as we weren't, some wag has suggested that the German money would be put to better use financing a military coup in Greece, which would then have to leave the EU.

By November the Greek economy will be slightly worse and my guess is that Berlusconi will not have put in place the extra measures required so there may be more summits to come.

Still, no hurry; after all it's not as if there was a crisis.

Oh.