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Enrico Letta, Italy’s New Premier, Puts Stimulus First

April 30, 2013 by Leave a Comment

“I will speak to you in the subversive language of truth,” Mr. Letta told lawmakers in his debut speech to the lower house of Parliament after the swearing-in of his cabinet on Sunday. Without measures that stimulate growth, he said, “Italy will be lost.”

He conceded that Italy, the European Union’s third-largest economy, must address the debts that had made the country one of the first to stumble in the euro zone economic crisis. But the most urgent priority, he said, is to reverse the downward spiral in what he called one of the “most complex and painful seasons” in Italy’s history.

The new prime minister’s rare coalition government has at least temporarily ended the political gridlock that has consumed Italy since an indecisive election in February. After Mr. Letta’s speech, he easily won a confidence vote, supported by political forces that are ordinarily at war with each other. He is expected to win a second vote on Tuesday in the Senate.

Mr. Letta said the effort to revive Europe’s economy lay in greater European integration, moving beyond a common currency and toward a political and banking union. “Europe can return to being a motor of sustainable development only if it finally opens,” he said. “The destiny of the entire continent is closely intertwined.”

His first trip, scheduled for Tuesday, will be to Berlin, Brussels and Paris, he said, “to give a sign that ours is a Europeanist government” and to confirm that Italy would continue with its budget commitments.

He said the fiscal rigor of the kind enforced by the government of his predecessor, Mario Monti, was an indispensable precondition to growth. But he also said fiscal rigor alone would “kill Italy” in the long run.

Mr. Letta is part of a growing European effort to question the austerity policies championed by Germany as the medicine to deal with the economic malaise in Europe, where unemployment has surpassed Great Depression levels in some places in the south and recession is creeping toward the once-resilient economies in the north.

Mr. Letta’s government is almost entirely composed of politicians from his party, the center-left Democratic Party, and from the center-right People of Liberty. They are united by a common cause: heading off economic disaster while toning down the antagonistic tenor that has dominated Italian politics for the last 20 years.

More than a decade of stagnation and protracted recession had taken a toll on citizens, Mr. Letta said. In some cases it had created a “personal vulnerability” and “lack of hope that risks turning into anger and conflict,” he said, citing an attack on Sunday in which an unemployed Italian man shot two military police officers in front of the prime minister’s office. The gunman later told investigators that he had aimed to kill politicians.

The new government was formed out of necessity after national elections in February effectively split Parliament into three factions. More than a quarter of the vote went to the anti-establishment Five Star Movement, which campaigned to overthrow the existing political class, depicted as overprivileged, overpaid and out of touch with the hardships faced by many citizens. A record number of voters abstained from the polls.

Demonstrating that the popular discontent had not been ignored, Mr. Letta said one of his government’s first orders of business would be to abolish the stipend that ministers receive on top of their salary as members of Parliament.

He pledged a series of tax cuts for small and medium businesses, and a delay in the increase of the value-added tax, a form of consumption tax, which had been set to take effect this summer.

The June payment of an unpopular housing tax would be canceled, he said, to give Parliament time to work out a reform of the tax that would “give oxygen to families,” especially those in greatest need.

Though several political parties campaigned to abolish the housing tax, it became the signature issue for the People of Liberty and its leader, former Prime Minister Silvio Berlusconi, to support Mr. Letta.

Article source: http://www.nytimes.com/2013/04/30/world/europe/enrico-letta-italys-new-premier-puts-stimulus-first.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

British Newspapers Reflect Split Over Thatcher

April 9, 2013 by Leave a Comment

While many former and serving politicians seemed to form lines to offer their reaction to her death of a stroke at age 87 on Monday, and radio shows were filled with recordings of her best-known utterances, some isolated protests broke out overnight in London, Bristol and Glasgow reflecting the same social schism between haves and have-nots that characterized the debate over her legacy.

Hundreds of her opponents gathered at the site of violent protests against her policies in the 1980s, with a small crowd in Brixton, in south London — where anti-Thatcher riots broke out in 1981 — chanting “Maggie, Maggie, Maggie — Dead, Dead, Dead.”

The gathering harked back the early days of the Thatcher era when joblessness soared as faltering industries were denied subsidies and a record 10,000 concerns went bankrupt. “Things will get worse before they get better,” she said at the time, depicting the nation’s economic malaise as a legacy of left-wing rule. With riots in Liverpool, Manchester and Bristol as well as Brixton, Mrs. Thatcher later recalled 1981 as the worst of her 11 years in office.

At what was billed as a celebratory street party in the southwestern city of Bristol overnight, around 200 people clashed with police officers trying disperse them early on Tuesday, the police said, and six officers were injured in scuffles. One officer remained in the hospital on Tuesday and one partygoer was arrested for violent disorder.

The venom of the protests recalled policies encouraging private business and crushing labor union power that her admirers depicted on Tuesday as liberating the economy from years in the doldrums and that her foes characterized as ruinous for the poor. Many critics also remembered what was widely seen as a catastrophic political misjudgment toward the end of her third and final term as Britain’s longest-serving prime minister of the 20th century when she sought to impose a so-called community charge, which was widely known as the poll tax, provoking mass public protests.

“Margaret Thatcher broke Britain and replaced what had come before with something crueller, nastier,” said the left-wing Daily Mirror. In the northern city of Sheffield which blamed her for the loss of jobs, the regional newspaper, The Star, said in a headline: “We can never forgive her.”

Several radio shows were devoted to Mrs. Thatcher’s record in crushing the labor union movement after confrontations with miners and printers, among others. But others recalled more popular measures — such as selling off public housing to private buyers at reduced prices — that extended private ownership to citizens along with opportunities for small investors to purchase stakes in privatized state industries.

The liberal-leaning Guardian said: “There should be no dancing on her grave but it is right there is no state funeral either. Her legacy is of public division, private selfishness and a cult of greed, which together shackle far more of the human spirit than they ever set free.”

By contrast, conservative newspapers such as The Daily Telegraph and The Daily Mail offered enthusiastic praise for what the Mail, echoing Prime Minister David Cameron, called “the woman who saved Britain” and “a giant beside who other peacetime politicians of the 20th and 21st centuries look like mere pygmies.”

On Monday, Mr. Cameron said Parliament would be recalled from a recess to assemble on Wednesday so that lawmakers can offer their views in advance of a ceremonial funeral with military honors next week, during which Mrs. Thatcher’s body will be brought to St. Paul’s Cathedral on a gun carriage — the traditional cortege for royalty and leaders of stature, including Winston Churchill.

While hundreds of dignitaries are expected in London for the occasion, the precise date has not yet been made known.

Her body will not lie in state and the ceremony will not formally be a state funeral, according to the British authorities. But it will be conducted with the trappings of a historic moment with streets cordoned off and military honor guards.

Mrs. Thatcher died in a suite at the Ritz hotel where she had been staying as a guest of the owners since she was released after being hospitalized in December, British news reports said. An ambulance removed the body overnight and took it to an undisclosed destination.

Article source: http://www.nytimes.com/2013/04/10/world/europe/thatcher-death-reaction.html?partner=rss&emc=rss

Filed Under: Media Business Tagged With: , ,

News Analysis: Britain’s Economic Malaise Brought Ratings Downgrade

February 25, 2013 by Leave a Comment

Prime Minister David Cameron and his increasingly jittery coalition government have made deficit and debt reduction a defining priority. In December, his powerful chancellor of the Exchequer, George Osborne, warned that an austerity program that had already resulted in the elimination of tens of thousands public-sector jobs would have to be extended for a year longer than planned, to 2018. But that same austerity program has contributed to long-term economic malaise.

On Friday Moody’s became the first ratings agency to strip Britain of its prized triple-A investment grade, reducing the country to Aa1. In its report, Moody’s said one of the core factors behind its decision was the very slow pace of the British recovery.

Mr. Osborne said afterward that Moody’s decision was “disappointing news,” but he promised not to let the downgrade deflect the government from its deficit-cutting strategy.

The challenge Mr. Cameron and Mr. Osborne face in turning around the economy and changing Britain’s status as a fiscal and trade laggard was underscored by two statistics released Friday in a widely anticipated European Commission economic forecast for the European Union.

The first is that despite presiding over one of the longest and highest-profile European austerity campaigns, the British government will end this year with a primary deficit — the purest measure of how much more a government spends than it receives in taxes — of 4.3 percent of gross domestic product. That is by far the highest such figure in Europe and second only to debt-ridden Japan among the world’s developed economies.

The second is that even though the pound has lost up to a third of its value against major currencies since the onset of the financial crisis, Britain this year will be the only developed economy in the world that will register a current account deficit that will be higher, at 3.1 percent of G.D.P., than it was in 2009.

The current account balance is the broadest measure of a country’s ability to sell its goods abroad. The larger the deficit, the more a country must borrow. All things being equal, a less costly currency should make it more attractive for foreigners to purchase a country’s goods or invest in its assets. Export powers like Germany and China run large current account surpluses.

Mr. Cameron has touted the benefits of having a flexible currency, free of the constraints of the euro — and Britain may even hold a referendum on its continued membership in the European Union. But even euro zone countries like Spain, Greece and Portugal, which three years ago had gaping account deficits that drove them to the brink of collapse, have made dramatic improvements in this regard. The European Commission even sees Spain moving to a current account surplus this year.

Britain’s persistent and worsening trade gap illustrates a troubling inability to increase exports even though the government has made this a policy priority. In his first address to Parliament, the incoming governor of the Bank of England, Mark J. Carney, pointed out that since 2000, Britain’s share of global exports had decreased about 50 percent — the steepest decline among the world’s 20 biggest economies.

One explanation for the disappointing British record in narrowing its deficit and becoming more competitive is a surprising decline in productivity since the start of the crisis.

Since their economies tanked, countries like Spain, Portugal and Ireland have become more competitive by laying off workers. That should set the stage for a more robust return to growth once the recession ends.

In Britain, however, the opposite has been true: Despite stagnant economic growth, the British unemployment rate has remained relatively low, at just under 8 percent. In other words, Britain needs more workers to produce the same product — which, in addition to keeping the economy from growing strongly, pushes up labor costs, making exports more expensive to foreign buyers.

Article source: http://www.nytimes.com/2013/02/25/business/global/britains-economic-malaise-brought-ratings-downgrade.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Turnaround Expert Takes on Italy

November 29, 2011 by Leave a Comment

MILAN — In his first three years as chief executive of Banca Intesa, Corrado Passera changed almost three of every four of the bank’s 4,200 branch managers. He also devoted a large amount of his time to persuading his 60,000 employees that he had a credible plan for revamping what would to become the largest consumer bank in Italy.

That level of activity may now seem like a holiday to Mr. Passera, who, as Italy’s new minister of economic development and infrastructure, must tackle the economic malaise that hangs over the country and its 60 million residents.

The future of Italy’s huge public debt, the country’s ability to service that debt and, by extension, the long-term future of the euro ride on whether Mr. Passera can return the country to robust economic expansion after a decade in which annual growth averaged about 1 percent.

“Passera faces many obstacles, but the biggest one is the risk that Italy becomes hostage to interest groups that block change,” said Andrea Boitani, a professor of economics at the Catholic University of Milan.

“In Italy’s favor is that it seems there is the general desire to start afresh,” Mr. Boitani added. “This is important because countries begin to decline when interest groups get too strong and make it impossible to change and innovate. There is, of course, the added problem of Italy’s debt.”

The public debt, the highest in the world after those of the United States, Japan and Germany, is equivalent to about 120 percent of the country’s gross domestic product. By way of comparison, Germany’s debt is about 82 percent of G.D.P., France’s 85 percent and Greece’s 163 percent. Countries can lower that ratio by spending less and taxing more, or by increasing economic output.

Prime Minister Mario Monti, who is also the economics minister, will have the job of getting spending cuts and new taxes through Parliament. It is Mr. Passera’s task to lift G.D.P.

“If the government carries out necessary reforms and helps boost confidence, that could go a long way to facilitating growth,” said Marco Valli, chief euro zone economist at UniCredit Global Research in Milan. Italy is fortunate, he said, in that “you don’t have the structural problems of a place like Spain where the private sector is heavily indebted and has to tighten its belt.

“In Italy growth is low because the country is not very competitive,” Mr. Valli continued. “But if you make changes to the private sector the response can be big.”

Mr. Passera, who is fluent in English — far from typical among the Italian political class — declined to comment for this article and has not given any interviews since becoming minister. Over the past several years he has made clear what his grand vision for Italy is and has long maintained that lowering public debt and stimulating growth are not mutually exclusive.

A first important step, Mr. Passera wrote in an opinion article published last year in The Wall Street Journal, would be for Italy to invest €200 billion to €250 billion, or $267 billion to $333 billion at current exchange rates, in the next five to seven years on infrastructure. The investment could be made without increasing public debt if Italy used public funds already allocated but not yet spent, as well as European Union funding and private finance, he wrote.

Other important steps would include squeezing efficiencies out of public spending, addressing tax evasion and selling public assets.

Mr. Passera, 56, earned an M.B.A. at the Wharton School of the University of Pennsylvania before starting in 1980 at the consulting firm McKinsey Co. He then became general manager of CIR, the holding company of Carlo De Benedetti, the principal antagonist in the Italian corporate world of Silvio Berlusconi, the media mogul who stepped down as prime minister this month. Mr. Passera covered various jobs in the De Benedetti publishing empire and at Olivetti, the typewriter and computer maker owned by Mr. De Benedetti.

In 1998 Mr. Passera became chief executive of Poste Italiane, the state-owned postal service, and it is here that he earned the reputation as somebody willing to take on difficult challenges while betting on big ideas. He brought on Massimo Arrighetti, now chief executive of SIA, which sells technology used to facilitate electronic payments, to implement a plan to turn the postal service into a consumer bank.

Article source: http://www.nytimes.com/2011/11/29/business/global/turnaround-expert-takes-on-italy.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Anti-Wall Street Protests Spread to Other Cities

October 3, 2011 by Leave a Comment

On Monday, protesters were camped out in Los Angeles near City Hall, assembled in front of the Federal Reserve Bank building in Chicago and marching through downtown Boston to rally against corporate greed, unemployment and the role that financial institutions have played in pushing the country into its continuing economic malaise.

Though the groups have no central organization and protesters in various cities are encouraged to come up with their own list of reasons for demonstrating, the protests have been organized using Facebook and Twitter to collect money, food and blankets and to enlist more supporters.

The groups have committees responsible for welcoming, security, transportation, art and the news media. Each has its own Google group. The arrests Saturday of more than 700 protesters on the Brooklyn Bridge for blocking the roadway have energized the movement, and on Monday, new protests were planned for other cities, including Memphis, Tenn.; Allentown, Pa.; and Hilo, Hawaii, according to organizers.

Later this week, rallies are scheduled for Detroit; Portland, Ore.; Minneapolis; and Baltimore, as well as in cities that rarely see such civil disobedience — Mason City, Iowa; Mobile, Ala.; Little Rock, Ark.; Santa Fe, N.M.; and McAllen, Tex., according to Occupy Together, an unofficial hub for the protests that lists dozens of demonstrations planned for the next week, including some in Europe and Japan.

In Chicago on Monday morning, about a dozen people outside the Federal Reserve Bank sat on the ground or lay in sleeping bags to shield themselves from the autumn chill. All around them were protest signs and hampers filled with donated food and blankets. A couple of people played instruments. A few passers-by asked if they needed anything.

The demonstrators, who have been in Chicago since Sept. 24, said they had collected so much food that they had started giving the surplus to homeless people.

Micah Philbrook, 33, who said he had been camping outside the bank for more than a week, cited the Wall Street protests, which began Sept. 17, as his motivation.

“It spoke to me so much I had to do something,” Mr. Philbrook said. He acknowledged, however, that “it’s all blurring together.” Each evening at 7 p.m., he said, the number of protesters swells as people come from school or work and the group marches to Michigan Avenue.

As is true with the protests in New York and elsewhere, the participants are demonstrating for a variety of reasons.

“We all have different ideas about what this means, stopping corporate greed,” said Paul Bucklaw, 45. “For me, it’s about the banks.”

Sean Richards, 21, a junior studying environmental health at Illinois State University in Normal, said he had dropped out of college on Friday and had taken a train to Chicago to demonstrate against oil companies.

Mr. Richards said he did not plan to go back to school and would continue sleeping on the street for “as long as it takes.”

“We’re sending corporations a powerful message that we know what they’re doing,” he said. “For people, we’re sending the message that we have to unite as one front.”

Article source: http://feeds.nytimes.com/click.phdo?i=c0c783ad949f544095ea5087b41e3a2a

Filed Under: Economy News Tagged With: , ,