Emmanuel Macron and Angela Merkel announced yesterday that they proposed jointly that the EU put 500 billion Euros of debt up for auction: to all intents and proposes a Eurobond emission. This way the EU as a whole can share the debt burden without increasing the cost of German bonds. Ursula Von der Leyen was not there. This is a proposal, not policy, but the Franco German alliance is the powerhouse of Europe and keeping the 27 carriages of the European train on track will need all their energy, if not more.
So, it’s 300 billion in France, 500 billion in Germany, the “equivalent” of 300 billion in Italy (hmm) plus the 750 billion from the ECB (despite reservations of the German Supreme Court) and now this, another EU bond emission of 500 billion (assuming the “Frugal Four” accept).
Almost two and a half trillion Euros of debt. Plus 2% of GDP in loans from the ESM with no strings attached if used to combat COVID19 plus 100 billion of loans from the EU to combat unemployment.
Is it enough? It depends what all this money is spent on.
Problem 1: The inefficiencies (greater or smaller according to the states) of governments means that many of the individuals or companies applying for support (either the furlough money or government guaranteed loans) have had none yet. The money may come in too late. Banks will start seeing bankruptcies and try to plug the gaps. We saw this in the Great Financial Crisis: banks see a company failing for any reason (including invoices not being paid by the cash strapped government), and refuse to pour more money in thereby provoking bankruptcy. In COVID19 crisis state guaranteed loans come in too late. Banks everywhere have been “ordered” to help and not repeat the mistakes of 2012. In Italy 6 out of 10 applications for the 25,000 Euro loan have not been accepted or extra paperwork required, and the backlog is enormous.
With an increased rate of bad loans, banks will be tempted use whatever funds they receive from the EU to balance their own books. The ECB has to make sure this doesn’t happen.
Problem 2: Confidence and trust: the way the last financial crisis panned out, the Basle 3 rules made it impossible for companies in difficulty to get loans to tide them over and forced banks to hold massive liquid reserves. On the one hand government contracts dried up and government bills went unpaid, and on the other the banks drastically curtailed the credit ratings of companies with credit with the government. Now the government allows companies to detract unpaid state credits from their taxes but this may not be enough but that leads to problem 3.
Problem 3: Governments will be not only be handing over billions of Euros to private individuals and companies, but also raising less money in taxes. Although allowed to run bigger deficits and with ECB guarantees on loans so able to raise bonds without damaging its own ratings, governments will be faced with huge amounts of debts. The Italian government is proposing to come into strategic companies as a partner, thereby gaining assets in exchange for loans (similar to the nationalisation of RBS by the British government in 2009) and cutting out the banks. It is the return of big government, and is the philosophy of most of the members of the government’s “Phase 2” Committee chaired by Vittorio Colao (although the government is in such disarray that the big committee seems irrelevant today). Giving governments a central role in the economy is also a policy espoused by Emanuel Macron.
Problem 4 : Furlough money that the state (eventually) delivers to employees cannot last for ever. An increase in closures, especially in the hospitality sector, will hit the young especially, workers without reserves. The 2012 crisis created a “lost generation”. Will the huge amount of money being borrowed be enough a) to keep them financially afloat b) to support key market sectors (as laid out in the Franco German proposal)? Europe, and especially Italy, can’t afford to see its manufacturing sector disappear as it did in 2012. Industry means employment, and Italy has enjoyed a positive balance of trade over the last 3 years.
Britain will not have access to any of this money of course.
The locomotive
The press announcement by the French President and the German Chancellor, if confirmed by the 27 member states, is a giant leap towards a powerful central EU government. The 500 billion should be used, say Merkel and Macron, to repatriate essential health services, accelerate the European Green Deal, and safeguard European strategic assets – so like Airbus, or the airlines (3 billion guarantee for Alitalia 6 billion for the Luxembourg based Fiat Chysler Automobiles, shortly to merge with Peugeot), it would subsidise strategic interests “within the legislation of the World Trade Organisation”.
Can Europeans rejoice that the excesses of globalisation are behind us? Without wishing to be a damp squib, this also implies a certain tension with trading partners. Because while the demand side of the economy has been devastated, supply too has been severely reduced. For example China makes essential parts for Mercedes and BMW, or textiles for the clothing industry. It is also a market for European goods, especially high tech articles such as planes, finished cars, or clothes. If Europeans become autonomous in car parts, the Chinese may have to become autonomous in car production creating a global competitor for European car makers. Outside Chine, the Asian Tigers – Vietnam, Singapore, Thailand, built their own economic and social stability on trade with Europe and tourism. Will they be returned to poverty? A whole new era of trade and a radical rethink of industrial production is already under way in Europe, dragged forward by France and Germany. Untangling the web of trade relations with China, especially, will be painful. The transition will necessarily be subsidised. Who gets those subsidies will be interesting to see but it’s unlikely to be the small scale entrepreneurs who collapse before banks or government come to their aid. It will be big businesses again, businesses with strategic (political) significance.
Interestingly wording in the joint communiqué mentions the promotion of a more digital Europe but also a fairer taxation of digital services: could this be a swipe at Amazon? Certainly the lockdown has penalised retailers, who have lost their market to online shopping. Amazon Europe is based in Luxembourg, not known for its transparent taxation system. It seems that VAT is regularly evaded by online traders, while necessarily paid by high street retailers. Is this another aspect of globalisation that Macron and Merkel are slowly rolling back? The German locomotive is pulling hard to keep 27 carriages on track, but at least four carriages have their brakes on. Will the convoy make it over Cassandra Crossing?
International Labour day is a day to be outside celebrating the great liberties Western society has conquered. Today they are being eaten away everywhere in Europe. They are liberties that the only socialist world power remaining denies its own people, liberties that the very same socialist power – China – is also eroding over here.
Admittedly workers are viewed more as consumers by the world’s capitalists (including China) than as producers of the world’s true wealth. And it is true that we have grown fat on the cheap industrial produce of socialist Asia, so in a sense western workers (as consumers) have exploited Asian workers for the last 20 years or more.
But neither Western nor Chinese workers deserve the sheer incompetence of their governments. Thankfully there was a return to the typical chaos of Italian parliament yesterday, with Matteo Renzi reminding Giuseppe Conte that the “other Matteo” (Salvini) was denied absolute powers in the summer not for them to be handed over to someone else, and Claudio Borghi (Lega, president of the budget commission) accusing Conte of visiting Milan and Bergamo during the night “Like a thief”.
But the incompetence remains, and with it the desire to cover up. The truth about the true number of dead remains hidden (in France, UK and Spain too), the true extent of the “Recovery Fund” that Conte claims was his idea, is yet to be revealed, and who is actually calling the shots behind the scenes remains opaque. The much hailed end to lockdown is nothing of the sort, disappointing millions. Worse yet, Luigi Di Maio, foreign minister, lied when he claimed the government bought millions of masks and dozens of ventilators from China when in fact these were paid for by Milanese entrepreneurs or the Red Cross. He allowed Russia and China to make cheap propaganda gains at the detriment of institutional allies and long term friends of Italy. The incompetence and opaqueness of this Italian government is worthy of the Kremlin and it has allowed the crisis to be manipulated by two of the world’s most corrupt and anti-democratic governments and in doing so has eroded its own standing in the European Union.
Workers of Italy are at the end of their patience, including the millions of self employed (many reduced to self employment with the loss of long term jobs), and I’m not talking about lawyers and accountants, but the young pizza delivery boys, kebab joint owners, painters and plumbers, truck drivers, manual workers who can scarcely survive even on the 800 Euro dole. Many of the older generation have savings, but the younger ones not only woke up to a dreadful new world in 2012, but only eight years later are hit by another tsunami.
So on this sad Labour Day of 2020, I just hope that they will come together and sweep away the incompetent and dishonest governments, left wing or right wing, that so failed to save tens of thousands of lives and millions of livelihoods.
Listen to what Giuseppe Conte has to say between 3minutes 50 and 5 minutes in his press conference last night.
We can be angry with the government, but better to “Work together, each of us contributing to improving the situation.”
Even the government is working (gosh!), together with the technical committee presided over by Vittorio Colao (former CEO of Vodafone) to bring about the much needed reforms, even those that were needed BEFORE the crisis.
WHAT DID I HEAR? The technical committee will be writing the reforms? What about Parliament, what about the Regions, What about the citizens? They will be carrying out reforms when we are still locked down? So we can’t take to the streets? Utter scandal. A lawyer like Conte knows exactly what this means. He’s telling us to shut up and let him do what he thinks best. The same man who suppressed a 20 January report on the state of health risk in the nation (denounced by the Mayor of Bergamo), the man who lied to the country on multiple occasions, who tried to protect himself and his government by surreptitiously introducing a subclause in the Cura Italia bill? But his smoke and mirros machine is broken. The emperor is naked.
Needless to say, not a single paper brought this issue up this morning.
Dear British people, expect this in the UK too. It is already happening in Spain (where a general has been appointed to track social media threats). The state will defend itself first because this is not a war, it is a power system in crisis.
As Italy approaches the first opening of the lockdown weird things are happening in the media.
We are discovering that there is a group of families preparing to sue the government. The facebook group is “Noi Denuceremo” and they are bravely gathering the personal experiences of people who are angry at the way this crisis was handled. They have promised legal battle. It is likely to be uphill, given the slowness of the Italian legal system. I wish them luck and support.
However getting any traction in actually holding governments to account is incredibly difficult. First of all there is no single culprit. The government blames the regions, the regions blame the government. And the first victim, as always, is the truth.
Don’t expect objective reporting.
The mainstream media is playing to the public for ratings, that are even more vital now that advertising is collapsing: bad news is good for ratings, so there’s always a negative twist to the good news (fewer numbers, but beware the autumn return, and so forth). In fact, when the media had an opportunity to warn the people, in December, they didn’t (at the time good news was good for rating). At the same time they appeal to the sentimental streak in the Italian mass psyche, which is also good for ratings, so everything is patriotic: “We will do it” (Italian Flag) “It’s going to be alright” (peace flag). These are the kinds of messages that the middle class catholic/liberal centre of society are likely to respond to. The poor, the migrants, have no voice and the rich have already taken their precautions. Neither class are going to buck the system.
I’ll expose my age by citing the Roland Barthes lessons in semiotics: in any message there’s the subject (signifié), and the words used to describe the subject (signifiant)which together make a sign or symbol, and (I add) spread by means of communication.
There are two subjects in today’s world: the virus and the collapse of the economy. By themselves they are symbols of nothing. But the words used to describe them turn them into powerful propaganda tools.
The word “War” has been used often, and the terrifying term “Pandemic” as well; the word “Crisis” is used to describe both. The other words such as “Unprecedented”, “Front line” are manipulated to gain the sympathy of the people in Italy and abroad. They are “Signs” used to promote a mental process that can only be transmitted (like the virus) through the mass media.
The words are chosen deliberately to suggest that there is a need for national unity against “The enemy” and anyone who breaks the rules are “Traitors” by implication. The images of the courageous actions during the Pandemic (people playing instruments on their balconies, flying the flag or the police arresting the lone sun bather) are used to build a sense of solidarity among those on the “right side”. If the term “A mistake” had been used instead of “Pandemic” then someone would have been held responsible, there would be a public enquiry and probably elections. “It’s not the moment for recrimination” we are told.
Then there are the many media of transmission of the word: newspapers and newscasts, facebook, twitter and other social media that have become mainstream (Giuseppe Conte gives half of his declarations on facebook).
The narrative is intended to benefit the system and the economic forces vested in the system that caused thee cisis in the first place: For example the advertising campaigns of Barilla (pasta), la Molisana (pasta) Conad (supermarkets) all play on Italian patriotic and family values (the home, the beautiful country, nature), two principles that have always gone hand in hand (the ad campaigns were, by the way, filmed during the COVID-19 lockdown), but there are many others that follow the same spirit – mainly food, but also other sectors, mainly intended to keep brands in the public eye and not throw away visibility created over the years through a massive spend (eg. Poltrone e Sofà furniture).
News stories are centred around easily identifiable themes (tragedy and loss or heroism and sacrifice) rather than the more complex description of what went wrong (and of course what went right).
To be quite clear, much of the usual advertising has disappeared: for example the automotive sector is almost entirely absent and the TV business is, according to some sources, expecting an 80% decline in advertising revenues this year. The 200-odd free digital channels will find making ends meet very difficult. With RAI and Mediaset taking 60% of the advertising cake, they will just have the crumbs left. That is why ratings are so important.
There are three notable exceptions to this cosy relationship between power and the media that manage to co-exist within the mainstream: Dataroom (Corriere della Sera, directed by Milena Gabanelli also seen on TV station La7, owned by Urbano Cairo) and “Report” on RAI 3 (previously run by Milena Gabanelli, who was sacked by the Lega/M5S government). RAI 3 is the former “Communist” and “Cultural” state broadcaster under the media power sharing arrangement of the “First Republic”. The fourth and fifth big players in the TV marketplace are Discovery and Sky, neither of whom have critical roles to play.
The state of the advertising market is a mark of the ability of Italian society to withstand what comes next and gives an indication of what might happen on the media front.
There will be a need to control mass communications: Giuseppe Conte may, or may not resist the pressure to control the narrative closely. We still don’t know what his true feelings are and what true powers he has, if he is, as he claims, a guarantor of pluralism in the media.
How does the government control the media? It’s an old question that has never been resolved, even since the Berlusconi era ended. Rai 1 is heavily influenced by the Catholic bloc in society: it is typically where the Pope will appear (he appeared twice, “spontaneously” during the 8pm news programmes in the last month, as well as giving a plenary indulgence”Urbi et Orbi” and celebrating Easter Mass). Since the PD has a very strong Catholic bloc, the channel will also be close to the government. Rai leadership (under former Fox and La7 executive Fabrizio Salini) tended to be pro government under the Lega/Five Star government, with a Five-Star friendly director of the RAI1 news programme (Giuseppe Carboni) and the Lega-Friendly RAI2 (Gennaro Sangiuliano) but with the change of government, key PD-friendly people have been promoted. Italy’s state broadcaster reflects the balance of power in the country and with the few exceptions mentioned above, does little to challenge the government.
The other big media power is Silvio Berlusconi’s Mediaset (Rete 4, Italia 1 and Canale 5). As would be expected, it tends to follow a middle of the road-rightist line. The difficulty when the Lega was in power was challenging a government in which Berlusconi’s ally, Matteo Salvini, was a leader. Since then, it tends to skew against the government but falls short of questioning major decisions (unpatriotic, and Berlusconi did found Forza Italia! after all). Mediaset has other axes to grind, being on the one hand entirely financed by advertising and on the other, aggressively bought into by Vivendi, France’s communications colossus. The COVID crisis will shuffle those cards very quickly.
La7 is the seventh channel, owned by Urbano Cairo, who also owns a relative majority of Corriere della Sera (which in turn owns Italy’s most popular paper, Gazzetta dello Sport). So far the La7 TV channel has been an independent voice, with a news programme run by former Mediaset journalist Enrico Mentana. With between 5 and 6% of the audience share, La7 however is very vulnerable to the collapse of advertising revenues (as is Corriere della Sera and Gazzetta dello Sport, a paper with little to report). The former “opposition” paper “La Repubblica” has merged with the Agnelli family paper “La Stampa” and has fallen in line with the Five Star – PD government. There is no equivalent of “The Guardian” that systematically calls government out on its errors.
There has also been a return of audiences to the mainstream media, due to old fashioned family viewing patterns imposed by the lockdown, and none of the mainstream media is challenging the government, rather it has made sure that the population is terrified into staying at home and has never yet pointed to the real issue: this is a crisis of the system, not a health crisis. The long list of government errors gets little or no coverage.
Discussing the lies and incompetence of the government has become difficult. As always, Italians tend to complain about the government, and even realise (doesn’t take much) that they are incompetent, but there is very little open protest (except for some brave anarchists in Turin a few days ago). There is even less protest in Italy than in Germany.
To make things look even better, the government has appointed a prestigious special committee to manage “Phase 2”, and , yet again, has trumped the regional authorities (Piemonte, Lombardy and Veneto, run by right or Lega presidents).
Led by Vittorio Colao, former CEO of Vodafone, it has co-opted not only experts of world renown, but also people who have access to grass roots activists, such as the labour law professor Franco Forcareta. It contains psychologists, and economists, including Mariana Mazzucato, founder of the UCL (London) Institute for Innovation and Public Purpose who supports government involvement in the wider economy. Likewise, Enrico Moretti is a California based Italian economist who has studied the regional wage and tax policies in different countries and on the one hand espouses flexible wage bargaining in different regions and on the other government intervention in taxing the highest earners (death duties for example that have been all but abolished in Italy).
The impression is that in Italy, as in France, a more “Dirigiste” and left – leaning government will emerge from the crisis (unless elections are held), also because it will be an essential player in keeping the economy alive. Socialism is back (I wouldn’t call it social democracy).
However, unlike Germany, and to a lesser extent France, in Italy this will be entirely a smoke and mirrorsoperation becausethe Italian government has such little financial fire power, and even less control of the grass roots population, especially in the south. Inevitably this will lead to renewed attempts to buy loyalty through hand outs.
The Conte – Zingaretti government does not have an electoral majority: Although the Lega’s popularity is now between 25 and 27% (Bidimedia and Ixè polls) according to new polls, and the PD is recovering ground (between 21 and 22%), the Five star movement has arrested it’s retreat around and stands around 18%. Any elections held after lockdown would see a stand-off between left and right, but no clear majority.
Delivering on the promises made to the electorate, especially in the south, will be an uphill struggle to say the least:
1. because of the huge number of unregistered workers who simply don’t exist according to the state, and so get no financial support, but who still vote
2. because clearly the 600 (upped to 800) Euros-a-month grant to self employed simply isn’t enough to keep them going until the economy recovers, especially in the tourism sector which is the single most hard hit sector (according to the World Travel and Tourism Council, the aggregate value of tourism and associated sectors was 232 billion Euros in 2018, 16% of Italy’s GDP). Hotels and restaurants cannot survive on 800 Euros a month (compare this to Germany’s self employed grant of up to 9000 Euros per month to companies employing up to 5 people).
3. Because the banking system is being slow to award the 25,000 Euro loans guaranteed by the State’s own Cassa Deposito e Prestiti, a state owned investment bank that manages about 420 billion Euros including the postal savings of Italian families (it also owns the state’s investment in strategic assets, such as Fincantieri and ENI).
The inefficient state also leaves huge gaps for the return of the “Mafias” – there are many expressions of the phenomenon – all of which have an excellent tradition of looking after their own, using dirty money to support “legal” businesses and thereby creating unprecedented unfair competition for legitimate businesses, especially in the south. None of the 17 members of the Phase 2 committee have experience in fighting the Mafia and its spin offs, nor has any member of the government discussed protecting Italian companies from Chinese take-overs (remember Chinese investors have controlling ownership of Pirelli, Ansaldo, the Trieste port and railway hub, among others).
So, big but inefficient state returning to control the economy risks a return to the 1980s syndrome, – high taxes (for those who pay them), high inflation but without the ability to devalue the currency, plus even more state debt. Remember the 1980s were the years of left and right wing extremism in politics (bombs and murders) and the uncontrolled power of what was called “I poteri forti” – dark powers that in the public imagination (and possibly in reality) managed and manipulated the state.
While this is by no means an inevitable outcome, without robust alternative narratives (based on facts of course), the return of Big State will increasingly sound like the return of Big Brother, all in the name of “safety first” and “national unity”.
And what of the European Union? Can the EU help stave off this dreadful scenario?
The result of the sovereign debt crisis of 2012 has led to 80% of the union’s liquidity (real money used for investments, reserves central banks are required to hold on the basis of the potential lending and cash needs) being concentrated in Germany, Netherlands, Finland, Luxembourg and France (see https://www.ecb.europa.eu/pub/pdf/scpops/ecb.op200.en.pdf ). The European Central Bank, while it can (just about legally) buy bonds to keep the cost of debt down, is not allowed to emit bonds itself.
The Italian banks’ main problem will not be lending money, but accounting for non-performing loans and even bankruptcies. They will be trying to cover their own losses before they lend any more, the same scenario as happened in 2012.
Government guarantees will help, but a low credit rating remains a low credit rating and the chances of a rapid influx of liquidity to save companies most in need (who have low credit ratings by definition), are low. The likelihood is that the credit will be used to consolidate the big companies to the detriment of the small, and there is no guarantee that these will be controlled by Italian businesses. In any case Governments and the EU are kicking the problem down the road, like the proverbial old can.
Under the circumstances the government will need to maintain control of the mass media – including pushing social media to the limits – to avoid anti-EU forces coming to the fore and that will mean a major and (almost) irresistible encroachment of free speech, in the name of the European Union. A balancing act that will become a hatchet job.
In Italy the numbers are so low the daily Civil Protection press conference has been turned into a twice weekly press conference. That signals an end to the truce; the knives are out in Italy, and the post-Conte government is in the making.
Little surprise then that the government is trying to protect itself: the tiny yet incisive online medium “Orwell” picked up a squalid attempt by the government to protect itself from prosecution for negligence before and during the health crisis. The sub-amendment of the “Cura Italia” bill was initially designed to protect doctors from prosecution, but then introduced protection for administration and political actors. The gross negligence of the Italian government and regional authorities leading up to the lockdown, and during the lockdown, can now be punished. Will it be?
Of course gross negligence is slightly better on the scale of negligence than the criminal negligence shown by the British government as highlighted by yesterday’s The Times article.
What can we say about the Spanish and French governments? Emanuel Macron also tries to distance himself from the poor management of the crisis by saying that he “personally” will put things right, (lack of masks and protective gear) detaching himself from his own government. Pedro Sanchez also blames someone else – his ally Podemos, who makes reaching any understanding with entrepreneurs and the opposition difficult due to his extremist views.
All except for the German government, are squirming to distance themselves from the original sin of unpreparedness.
The hypocrisy extends to the state owned media: Italy, France and Spanish media allow their governments to play “Saviours of the Nation.” The rising popularity of BoJo shows that it also works in the UK; in general, being on TV and in the papers gives political personalities credibility. Most would and could never be employed by private businesses simply due to their ineptitude.
Watching French state TV (I watch France 24), we see the government getting easy “Passes”, with few difficult questions being asked. The British, French and Italian governments make earth shattering declarations to the mainstream media about millions of masks and hundreds of ventilators arriving, when in fact often this vital equipment has arrived too late and does not reach the “front line” fast enough; and yet failures in logistics and planning are rarely reported because they are hard to explain. It is a complex world, where soundbites reduce issues to banalities and access is everything and access is granted to the compliant. This is a world where idiots sound clever and difficult questions are kept out of the press conferences. Far easier to tell tragic stories or edifying tales of heroism, than to point out every day failures (and, yes, of course it’s easy to criticise from the safety of one’s apartment).
Italy’s ability to actually pay most of those entitled to the 600 Euro life-saving bonus is ironically due to the inability of the state to slim down in the past 20 years, a small silver lining to an otherwise very dark cloud. Italy has more public employees than the UK, so is better equipped to actually do the paperwork. British self employed will have to wait till June to be paid, Italy’s were mostly paid by the end of March.
Body Count
Floundering forward was the easy part.
The hard part is yet to come. First of all counting the human and economic cost. Then rebuilding the economy (we can’t bring back the dead) and society.
How many people in Italy have had the disease and how many people died of it? That is the first truth to establish.
We know that the disease was circulating in the whole of Europe in January. If each individual with the virus contaminates 2.3, as was the case in Wuhan (reliable data?) and assuming he or she contaminates just that number, every day, then within the week before symptoms occur, one person could contaminate 150 people. But each of those 150 people, In the following weeks, after symptoms in patient 1 have developed, if not traced, those contaminated could possibly contaminate 150 each, leading to a staggering 22,000 within the first month, by which time the infection leaves the area of “background noise”, is identified as an epidemic, but is already out of hand. It’s the long period of asymptomatic infectiousness that is so dreadful about this virus. An interesting visual demonstration of how this works is here https://www.youtube.com/watch?v=gxAaO2rsdIs
By the time the lockdown of the 8th March happened, it was already far too late and hundreds if not thousands of contagious people were walking around showing no symptoms, during the months of January and February, when the Italian government was denying any threat. The first cases recorded in Italy were a Chinese couple, who fell sick in early February. Giuseppe Conte declared a state of emergency on the 31st January. Hundreds of cases of “Abnormal pneumonia” were recorded in Lombardy in January and February, and presumably the same was happening in the UK too. All European governments deliberately played down the risks, but while Germany prepared – or was already prepared – the UK, France, and Spain refused to acknowledge what was happening in Italy even after “Lockdown” on the 8th March. The UK had at least 3 weeks head start, and France and Spain 2 weeks to get their health systems into line.
Any government claiming to be able to trace the cases is living in a dream world, unless, as the Germans have done, they have such a capillary tracking system that everyone gets tested and everyone is tracked. It’s just money at the end of the day, after all.
The UK stopped tracking by early March, and even then, began far too late. Italy never even tried. No one will ever know how many actual cases there are and have been, just as the true mortality rate will never be known, and no one will ever fully translate those numbers into names, and faces.
Once the pandemic had broken out the problem was no longer how many people were infected but how was the health system was going to cope. This is an important distinction: because from it stems what happens next.
Let’s assume that by the end of march 2% of the European population is infected, (today the figure stands at 700,000 taking into account UK, France, Italy, Germany and Spain who’s aggregate population is 350 million) and the case fatality ratio is about 10% (more in the UK and Italy, slightly less in France, much less in Germany) we would expect the death rate to grow to 70,000, whereas it is actually, officially (Johns Hopkins Coronavirus database) around 80,000 (and this is with Germany’s 5,000 only), and the number of deaths over and beyond the seasonal figure, even according to government statistics, is far higher than recorded by the health service. So either the disease is far more lethal than previously thought or there are far more cases than accounted for.
This is why governments are so slow to ease the lockdown. They simply don’t know. Only now is Italy deploying enough tests to have a reasonably accurate idea of the number of infected people in the northern regions. The UK isn’t even able to test all the medical staff.
The worrying thing is that the Italian government has had a taste of control. It’s like a lion that’s tasted hiuman blood: it can become a man eater. “They” can take a hatchet to civil liberties in the name of protecting the masses. While in Germany, knowledge and trust go hand in hand, in Italy an ignorant and ill equipped state turns to Big Brother to “save lives”. An app called Immuni that should tell you when you are close to someone with health problems, allows you and them to be tracked by the police. It sends shivers down my spine.
The boys in blue now have new toys – drones and tracking apps – that allow them to see even more of your private life, check where you go, and ask for justification. Can we trust any state that proved so incompetent with the nation’s health with our private lives? Our only hope is that inefficiency rides with ineptitude. This could be the end…
They’ve got to go! Every single one of them. The Mad Hatter BoJo, The White Rabbit Giuseppe Conte, the Tortoise, Pedro Sanchez. Already the Walrus and the Carpenter have eaten all the oysters and there’s nothing left to celebrate.
The governments of the Western world need to be decapitated.
First: because they ignored warnings being sent by the WHO in December and January. Betrayal of trust.
Second: because every single government, except Germany and Norway, have failed to provide the services their tax payers need: efficient health services, IC Units, hospital beds, over the last decade in the name of “Austerity” and “Lean Government”, privatising strategic areas of state activity. Britain and France ignored what was happening in Italy and Spain and failed to put in place mass testing of the kind Germany has set in place, and failed to buy in the necessary equipment to deal with the worst cases. Britain, Spain and Italy sent their hospital staff to the front lacking the basic personal protection and thought a nice “clapping” of an evening would be enough. Betrayal of duty of Care.
Third: because every single government has either lied about the true extent of the contagion or simply isn’t in control enough to know who has the disease and isolate them. Spain is reporting 80% more deaths than recorded. Italy’s own government bodies are reporting between 3 and 4 times as many deaths as officially reported. They all seem to be ignoring deaths in care homes. Purposeful ignorance
Fourth: – with reference to Italy and to some extent Spain, the governments have consistently whipped up anti-European and anti-German sentiment to put pressure on the EU Commission and the anti-Eurobond front, to get their way. This is blackmail, and is neither based in logic or fact. And it is a dangerous genie to get out of his box. Hypocrisy
Fifth: – and this is true everywhere, the governments of Europe are slowly using this “lockdown” as a tool to see how far the general public will resist, unquestioningly “emergency measures”.
The sickening thing is that the governments are taking the credit for a victory that is really a disaster. Not a single one has offered to a) resign because of its incompetence or even b) have the opposition in a government of national unity. Worse, the governments are whipping up patriotic and nationalistic fervour to keep citizens on-side and killing any form of criticism. Demagogic use of suffering.
We add the ridiculous to the tragedy: we have been treated to the humiliating sight of the worlds 6th greatest industrial nation thanking Albania and Russia for aid that is of no use whatsoever. Equipment is flown in from China, the state that lied about the epidemic in the first place, the state that Italy has contracted with to be its gateway into Europe, but it arrived too late for it to be any use, now the “Peak” is over and ICUs are slowly emptying. And yet Conte and Di Maio bow in gratitude and adoration. From insult to Injury: A field hospital and the temporary hospital in Milan’s old fair buildings have come on line far too late, held up by bureaucracy and in-fighting.
Italians can do better without the governments – central and regional – and would be better off without them. This is probably true of every single other European Nation.
“You cant change horses half way across the ford” say the Italians. Well I would, if your horse is drowning.
At the European level we are faced with a similar unpreparedness. The mirage of agreement came out of last night’s Eurogroup meeting: but the Eurogroup is an informal body and has no mandate to legislate.
It came up with a hotchpotch of resolutions that mean all and nothing, allowing the governments of the members states to claim they won the argument, which of course is untrue-
Here is the link to the whole document which can be broken down as follows.
1. All the previous measures, including the ECB’s Pandemic plan are great and thanks for that
2. The Eurogroup – which is not an official organ of the EU – also welcomes the greater flexibility in applying EU rules on financing, waiving the co-financing requirements and the reactivation of the European Support Instrument (2.7 billion Euros)
3. the European Investment Bank has also provided 200 billion Euros of guarantees to banks supporting Small and Medium Enterprises. “This initiative is an important contribution to preserving the level playing field of the single market in light of the national support schemes.” Remeber this is in addition to the 750 billion Euros of loan guarantees from the ECB Pandemic Plan.
3. The European Stability Mechanism has agreed to create a Pandemic Crisis Support mechanism that corresponds to 2% of the contributing nations GDP as of end 2019 that can be used without supervision but only in heakth related investments. “It would be available to all euro area Member States during these times of crisis, with standardised terms agreed in advance by the ESM Governing Bodies, reflecting the current challenges, on the basis of up-front assessments by the European institutions. The only requirement to access the credit line will be that Euro area Member States requesting support would commit to use this credit line to support domestic financing of direct and indirect healthcare, cure and prevention related costs due to the COVID 19 crisis. The provisions of the ESM Treaty will be followed. Access granted will be 2% of the respective Member’s GDP as of end-2019, as a benchmark. With a mandate from the Leaders, we will strive to make this instrument available within two weeks, while respecting national procedures and constitutional requirements. The credit line will be available until the COVID 19 crisis is over.”
For the Italians ans Spanish the main goal is that this not be under European Union control and as long as the money is spent on investments in the health sector: the EU waives any form of oversight. This reflects the fear that the investments could be used to pay off debt of for other infrastructures.
4. In the spirit of Article 122 of the (Lisbon) Treat the Eurogroup also agrees that the European Stability Mechanism will provide loans of up to 100 billion Euros to safeguard employment. “It would provide financial assistance during the time of the crisis, in the form of loans granted on favourable terms from the EU to Member States, of up to EUR 100 billion in total, building on the EU budget as much as possible, while ensuring sufficient capacity for Balance of Payments support, and on guarantees provided by Member States to the EU budget”
5 There is also provision for the creation of a recovery fund from the EU budget.
No Eurobonds, No Coronabonds. Who won? Who lost?
Who cares?
Is it enough? Who knows? For sure Germany won’t share its virtuous economics with debt ridden Italy.
The good old days when they could all meet in the same room….
The worst thing about this crisis is the deep dread of incompetence by rulers all the way around Europe (I’ll leave the USA out of it).
Mauro Ferrari has been the President of the European Research Council for three months, and collaborated for the seven preceding months, after his appointment and before he took up the job. This is his resignation letter. It’s an interesting read. It reminds me of the crew of the Titanic refusing to break the rule book to save peoples’ lives. His main complaint is that the council’s Scientific Council rejected his proposal for a COVID-19 task force because the council only finances projects “From the Bottom Up”.
What does that mean? it means that projects are financed after proposal and peer review. But the ERC’s statute also says it is there to invest in fundamental and not applied research. In Ferrari’s view, this slow committee-based approach impedes the rapid diversion of effort towards COVID-19. Research on Coronavirus, is instead financed by the EU by other working groups but still uncoordinated. Ferrari is a respected entrepreneur as well as a scientist, and has worked in the United States’ best universities pioneering nanotecnologies in medicine. Once again the EU remains anchored to its pre-COVID-19 ways.
In the same way, the finance minister of the Netherlands, Wopke Hoekstra, blocked the use of the European Stability Mechanism to finance any form (at that point still entirely conceptual) of European Bonds during an all night meeting of the Eurogroup, (finance ministers of the Eurozone countries), in what has been perceived at a tactical ploy to have the Dutch Prime Minister Mark Rutte take the blame for them when the heads of government meet later today. It has sent emotions through the roof in Italy and Spain and even in their own coalition the other two parties, the Christian Union and the liberals of D66 have distanced themselves.
Of course Rutte and Hoekstra are looking over their shoulders at the nationalist right. Angela Merkel’s government too however were happy to let the Dutch take the blame for blocking what has become a deeply unpopular proposal in Germany. The Germans don’t want to pay for Italy and Spain’s debt. They fear that not only the Coronavirus debt but all the debt will be shared among the “virtuous” nations. Other solutions are possible says the German Chancellor.
Europe, today is producing a cacophany of uncoordinated reactions, with no conductor. The health crisis was avoidable, can they at least work together to avoid an economic disaster? Maybe fewer words and more thought would help.
I am happy to publish this comment received from my friend Michael Hall.
“EYES WIDE SHUT”
By Michael Hall
Boris Johnson, the British Prime minister has been recovered in an intensive care unit because of the Covid 19 pandemic this is the news breaking on the BBC, at the time of writing.
The first thought that comes to mind: so there is justice in this world after all. He bluntly told Britons that the best remedy to contrast the epidemic was a sort of “Herd therapy” and to be prepared because lives would be lost. Tact was never his forte. The Prime Minister probably never thought for a moment that the Coronavirus could take his life too. The advocated Nazi therapy that sentenced Britons to a “survival of the fittest” competition must have backfired though. If Bojo, who is now in intensive care, were to fall because of his ill-councilled cure he would be the first victim of his own medicine.
My my, this Covid 19 pandemic is really changing the world. For the first time in history the supreme commander falls dead even before the battalions, regiments, and units of his army, navy and airforce do. Never before in British history has a Prime Minster paid in person with his own life for his belated reactions. Let’s hope that Mr Johnson won’t be the first, for his sake and his family’s. It must be said clearly however that his eyes wide shut policy that failed to see the pandemic coming as early as January, despite the great many alarm bells ringing from Italy, Spain and France, jolted his administration to take example from these countries only at the end of March. The delay in enforcing a lockdown will cost more lives that could otherwise have been saved. These at least, it is hoped he will account for politically. Lord Carrington, the foreign Secretary during the Thatcher Government resigned for underestimating the possible Argentinian invasion of the Falklands. In comparison, what should Bojo do? Commit Hara Kiri?
In this post in the Medium.com blog, physicists Daniele del Re and Paolo Meridiani bring to light a shocking truth. The accounting for the deaths due to Coronavirus are all messed up. Two documents, the ISTAT (https://www.istat.it/it/archivio/240401) count and the SiSMG (Andamento della Mortalità Giornaliera (SiSMG) nelle città italiane in relazione all’epidemia di Covid-19) – the system of surveillance of daily death rates in Italian cities, both disagree with the figures released by the Istituto Superiore della Sanità. The figures reported are between 3 and 5 times the numbers reported by the government ISS/Protezione Civile. The discrepancy has been mentioned before in this blog with regards to Bergamo and Parma, but never has the full picture come out before. The figures reported are based on the difference between the averages of the past death rates in the same season between 2015 and 2018 (and verified for this year through comparison with cities where Coronavirus infection has not impacted the death rate) and this year. Obviously not all the extra deaths can or should be attributed to COVID-19, but the statistical differences for March are stunning. Not only is the death rate higher, but the peak of deaths looks as though it is earlier, or maybe it’s just that the government is catching up. Whatever the case, there may be a significant discrepancy between the figures we have seen reported in the daily briefings over the last month of lockdown and what is actually happening on the ground. The figures also beg the question: how did China keep its death toll to just 3300? Or did it? And if Italy is under-reporting, are other countries too? Willfully or by mistake? And if the latter, are those governments really in control? We need to keep asking those questions until we get convincing answers and those seem to be a very rare commodity nowadays.
Breaking down the Coronavirus crisis into it’s component parts, I’ve tried to make sense of what is happening and make my crystal ball a little more reliable. Like all crashes, be they car, train or air, this one is a mix of human error and technical glitches, and it isn’t over yet, and of course, no-one (maybe not no-one) knows what is round the corner.
I’ll begin by citing an article in Corriere della Sera by Daniele Affinito, in Milena Gabanelli’s Data Room section. It lays bare the destruction of the Italian health system over the years.
On the macro level the bottom line is that since the Monti government of 2011 the cuts to the health system have actually reduced what in textbooks reads as a good ration of beds to 8.58 intensive care beds, (and not the 12.5 previously reported) per 100,000 citizens (Germany 29.2). and 3000 ventilators. While the report laments the reduction of spending as a ratio of GDP, it doesn’t put that figure in relation to the collapse of GDP following the Great Financial Crisis and ensuing sovereign debt crisis. Forced to run a budget surplus in real terms by measures imposed by the EU on the one hand but even more aggressively by institutional creditors, Italy’s industrial output shrank by a third in the first couple of years, and with it GDP, as did the spending power of the successive governments. The health system rationalised, closed small hospitals, spent more on social services for the ageing population and cut back on the most expensive forms of care – Intensive Care Units. This is not wrong in itself, but in this crisis has denied hospitals of the resources they need to keep people alive.
Compare this situation with the UK, where officially there 6.6 ICU beds per 100,000 population and according the this article there are 8,175 ventilators, in all. Britain is outside the Eurozone and enacted Quantative Easing – and so was saved from the long term recession Italy suffered from, but despite this according to a Kingsfund report not only is the number of hospital beds still below the three leading industrialised nations in Europe, (Germany, France, Italy) but in real terms, despite more money being spent, more hospital beds have been cut and the NHS “rationalised”. The UK, like Italy, is spending about 7% (9.1% under new accounting rules) of its GDP on health care (including locally run social care), while Germany, France and Sweden spend 11%.
However there is another aspect, maybe even more decisive than the way governments have spent tax-payer’s money. It is government – local and central – reaction. The 2016 anti pandemic plan is reported in the Corriere della Sera (28th March 2020). Key elements were not implemented, mostly the pre-pandemic period. The WHO failed to declare a pandemic, and the Italian central government and regions, including Lombardy, failed to pick up the higher than usual number of cases of pneumonia already present in December (40 cases in the week of the 30th December in Piacenza, up to between 50 and 80 a day at the San Paolo Hospital and 70 a day at Niguarda, both in Milan. The government continued to allow free travel, and pretend nothing was wrong, despite the plan requiring the government and regions to set in place monitoring and preparation protocols. The UK had three weeks’ lead time and did nothing with it. In both cases a month of preparation might have changed the course of the pandemic: an earlier lockdown and more thorough monitoring would have stopped the fatal Atalanta – Valencia game and closed off Bergamo earlier, avoiding the tragic scenes we have today.
As we shall see in the next chapters, the crisis is as much, if not more, of a crisis of state structures as a pure pandemic. As Yanis Varoufakis says in this interview the coronavirus crisis is actually a crisis of a system. His conclusions go far beyond this chapter of analysis and will be discussed later.
In the next chapters I will discuss to the best of my ability:
estimate the true extent of the pandemic
How nations react – the stages of breakdown of the “Social Contract” between state and citizens
The communications arena and the growth of Big Brother
Eat, Drink and be merry….” we all know how that all ends up. This Palm Sunday we are all reminded. How on earth did we get here, to this place of dread and frustration, in line for the double whammy of disease and economic catastrophe?
As “M” says to the sinister “C” in the recent “Spectre”: “Now we know what C stands for…careless.”
Well yes. They were careless and now three and a half billion people are in lockdown. At least half of those will starve. Some in our own western countries will too, people who borrowed money to go on holiday (a new post industrial right), and took out cheap credit to buy buy buy.
Pope Francis made us all feel guilty for being selfish during his lonely Urbi et Orbi blessing, but that’s not going to help us much to get out of this mess (although our sins have been forgiven in a universal indulgence, but only us Catholics believe it).
OK. So how did we get here, what are we going to do and what’s going to happen? As I drink my second “Aperitivo” (I have to warn against drinking too much in lockdown), and my family considers what succulent dishes to cook for Palm Sunday Lunch, this is what I know so far.
Palm Sunday is a great day to take out the crystal ball and here’s what it said.
The big lies
Its been two days since I last posted. I tried to get a bigger and better picture of what the Coronavirus means to us all. Here is an overview of the analysis I’ll be posting under the analysis page. This is the story, the details will follow.
Somewhere out in China, probably in the Wuhan wet market, possibly mutating from a bat virus that ended up in someone’s soup, a new strain of this typically Chinese virus the “Corona Virus” infected the fist human being.
That’s a well known fact. Like Sars, it causes a huge respiratory deficiency, by provoking an immune reaction that swells the interstitial cells between the lung’s alveoli. This is a well known fact too, and not dissimilar to other viruses. The problem with this variant is that it takes at least 4 days to a week for the first symptoms to emerge. And if one person infects 2.5 (the Wuhan experience, see The Lancet (https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(20)30566-3/fulltext ) within 4 days without symptoms, a single person and those infected by him or her will have infected 390 people. Within a week that figure is 6,000 people. So within a week of the first contagion, 6000 people could possibly have been infected. A quarter, or approximately 1,500 people may not have shown symptoms at all. By the end of February the whole of Wuhan and Hubei province were in lockdown, after a period of criminal denial of the new virus by the Chinese Government. First Big Lie.
The Chinese lockdown inflicted hardship on its own people, and within two months (actually three) blocked the treat. But the outbreak also happened to coincide with the Chinese new year (January 25) and many newly wealthy emigré Chinese returned home to celebrate and before you could say boo to a goose, went back to Europe.
They had every right to do that, and celebrating the Chinese New Year is one of the most amazing cultural events you can partake in. Nothing wrong with that. Once again, every infected person potentially infected 2.5 people, and a quarter of those infected, especially children, showed no symptoms. And those infected took between 4 and 7 days to develop symptoms. The maths is simple. By the beginning of February thousands in Europe had it. It wasn’t called Coronavirus. It was called “‘flu”, and “pneumonia”. But the European governments knew. Second big Lie.
On the 22nd January the Italian government ordered millions of face masks from their usual suppliers. They were preparing, but like all of Europe, including the UK a decade of austerity had done two things: so diminish the overall state apparatus that management of a short lead time health crisis had become impossible; reduced the number of staff and beds in a state health system focused on dealing with an ageing population. There simply wasn’t enough time. During February the Italian government went out of its way to downplay the crisis, with Luigi Di Maio telling the foreign press (27th February) that there was more of an “infodemic than an epidemic”. He had just been forced to resign as political leader of the Five Star Movement, so may not have been weighing his words. It was the third big lie
The same was happening all over Europe. Impossible to say when or how. The search for “Patient zero” and tracing people who had the virus was a waste of time. The virus was already eating away the fabric of our society. That infected people could be traced was the fourth big lie. At that point, the only solution was to test massively because COVID-19 was already circulating in society. Isolating infected people was the only way of preventing spread. The governments did not know who was contagious
In the coming years the mindset of European governments will be the subject of study. I once read a a brilliant book called “On the Psychology of Military Incompetence” by Norman F. Dixon. Every single government in Europe displayed utter and unforgivable incompetence, not just because of ignorance, but because of mindset. This is an important distinction: people can be overwhelmed by earthquakes or tsunamis, but not by events they know will happen. We pay our leaders to be prepared.
Some woke up faster than others. Some applied the right formula as soon as they woke up. Italy woke up first, but continued in the wrong mindset. Germany woke up later but then changed course radically. Spain, already fatigued by months without a government and with a precarious executive, reacted slowly and inconsistently, and took fewer precautions than even Italy.
The UK is a story unto itself.
Runaway events
On the 22nd February a certain Mattia arrived at the Codogno hospital with breathing difficulty. He was (is) a runner, fit and healthy. Rather than being hospitalised, he preferred to go home but then returned in an ambulance. He told doctors he felt as though he was drowning. Now there were enough tests available for him and the hospital staff to be tested. He had not only infected the ER staff but also friends and family, in his very active life. He worked at the Unilever factory close to Codogno. Tests there showed that he had infected dozens of people. The same day a case in Vo’, in Veneto showed that the infection had already spread out of the region. The very efficient Italian Civil protection system swung into action. Lodi, Codogno and Vo’ were declared “Red Zones”.
It was already too late.
The disease had already killed dozens of people, described as an “unusual pneumonia”. And would continue to kill, even during the crisis, possibly as many as four times the number of people recorded as dying of COVID-19.
On the 19th February the Bergamo football team Atalanta played in the Milan stadium San Siro, against their Champions league rivals Valencia. 45,000 people were there. It had been a long time coming. In their first ever knockout match in the round of 16, Atalanta beat Valencia 4 to 1. The Bergamo fans were ecstatic.
Four days later an undisclosed number of patients transited in the Alzano (Bergamo province) ER ward and were tested positive to COVID-19. The ER ward was closed and then, 24 hours later re-opened, in one of the biggest mysteries and scandals of the Italian response to the crisis.
Remember, for every COVID-19 infected person, within a week, he or she is able to infect up to 6000 people.
The towns of Alzano and Nembro in the highly industrialised Val Seriana became new hot spots, but were not locked down like Lodi and Codogno. The contagion spread.
Contagion also spread from Codogno to Piacenza, just across the Po river, where cases from the Red Zone were being treated. Some were sent to Parma, but the infection had already spread there too.
What was going on in the minds of the central government?
As the most controversial Christian Democrat Italian politician Giulio Andreotti said “Thinking the worst is a sin, but you’re nearly always right”. Politics undoubtedly played a part in the decision making process.
What was at stake:
– The government majority: a coalition of leftist populist Five Star Movement and professional centre-left establishment PD, whose popularity in the country has withered to less than the populist right “Lega”;
– The budget: the government negotiated a 2.6% budget deficit with the EU, but needs more to boost the waning economy and save itself in the next elections;
– The Migrant Crisis – I prefer the word Refugee Crisis – the ports are open again, but the deal with the Libyan coast guard has kept most refugees in detention camps in Libya (a whole new issue, to be discussed later).
The government had just about survived the end of the year. This crisis became a make or break moment.
The problem is that Lombardy, Veneto, Piemonte and Liguria are all run by the opposition Lega or a coalition of centre-right. Only Emilia Romagna is run by the newly elected (down from 70% to 40%) PD (Partito Democratico). So finding agreement with the four most impacted regions was not going to be easy.
Giuseppe Conte is a lawyer in his mid fifties, drafted into Parliament by the Five Star Movement, with no previous affiliation and called in to head the government as a respectable figure that the then Lega and the Five Star Movement could agree on. He has a vague following of sympathetic people, but no real party behind him. This is his strength and his weakness. He can truly play the “primus inter pares” in his new government, now with the PD supporting him. He has no choice: he must become the voice of institutional Italy, and maintain a balance with the opposition, especially his former ally, Matteo Salvini of the Lega, but always keeping an eye on the spin off of the PD “Italia Viva”, run by the other Matteo – Renzi, ready to cash in on his errors. It’s a quagmire. His only way of rising above it is by playing the statesman.
And yet as Prime Minister he is not fully in control: leaks to the papers on the 7th March warn thousands of southern Italians living in Milan that lock-down was imminent. They flee on the last train out of Garibaldi station, as though they are fleeing an invading enemy, unaware that they are carrying it with them. That night, Conte announces the lockdown of Lombardy, three provinces in Emilia Romagna and three in Piemonte. It is t the 7th March. It only takes 48 hours for him to announce the lockdown of the whole country.
Economic Catastrophe
Families across Europe are experiencing similar frustrations, on this Palm Sunday.
Most middle class families have pantries full of food. They can work on line and watch more catalogues of television entertainment than they can possibly exhaust.
This may last a week, maybe two. But then the reality bites: how can we feed our children and who is responsible for this catastrophe? How can the most prosperous generation of Westerners ever, have their lives destroyed like this? I may complain that I can’t go running, but my neighbours are beginning to ration food.
The COVID-19 crisis is a catastrophe that bears many similarities with the outbreak of the First World War, and like that war, will change the way we are. It does not evolve in a void and is the result of an interconnected international community.
The scenes of Syrian refugees attempting to cross into the EU from Turkey are still fresh in our minds. The crisis on Lesbos island predates the COVID -19 Lockdown by a few weeks. The ink on the deal between Erdogan and Vladimir Putin creating areas of influence in Syria is still wet on the paper when the COVID – 19 crisis explodes. The forces of General Haftar are at the gates of Tripoli and ready to attack with the support of Egypt and the UAE (and Russia), while Turkey has sent hundreds of Syrian guerrillas to support the Al Faraj government. Mali and Burkina Faso are still fighting Muslim extremists. The central and eastern Mediterranean see a daily death toll far higher than anything Coronavirus can deliver. Britain elected Boris Johnson to run the country and on the 31st January the country left the European Union. Bad timing.
A new European Commission took over from the previous one in January with Ursula Von der Leyen as President and former Italian Prime Minister as the EU councillor for Economic Affairs. A stroke of luck.
One after the other, the great western democracies fall. First Italy, then after a sort of “drole de guerre” France and Spain, then Germany, then the UK after a weird interlude of “lateral thinking” and “Herd Immunity theory”. Like at the beginning of the First World War, they fall because of the way they are interconnected. Britain, out of the EU commercial alliance, goes its own way for a couple of days, and then the lights go out there too. They are all subject to the same economic interaction with China, and they are all subject to the same stock market pressure (Britain maybe more than others, hence reluctance to “lock down”).
They have all been subject to a decade of self inflicted austerity, all have cut back essentials: health care, public transport, police forces: the EU states because they live by the wholly arbitrary 3% deficit rule; Britain’s austerity, since it is outside the Eurozone, is entirely self inflicted. However different the UK might feel, Coronavirus was spreading there at the same time as it was spreading on the continent. They government knew and did nothing, unwilling to invest in intensive care wards, new, dedicated hospitals, more staff, distracted by Brexit.
The fifth big lie is that this is a health crisis: it is a crisis of the health systems, unable to cope with the sudden influx of seriously ill patients. It is therefore a crisis in the state, in the way states think and operate and will lead to a crisis in confidence in the ruling élites. Only Germany has reacted with adequate measures to meet the task at hand, with hundreds of thousands of tests, identifying the healthy as well as the sick infected, and with a greater number of IC units, saving more lives. Of course, the pain of the labour reforms of the 2000s (that France was only just pushing through when crisis struck and that were forced down Italy’s throat by Mario Monti in 2011) has given Germany a surplus it has used in its social services.
In other countries the state apparatus has been cut to the bone and now that millions are calling in to get the help governments have offered, they either cause the system to crash (Italy, on Monday 2.5 million calls caused the INPS site to crash) or they have days’ of waiting time (in the UK waiting times to speak to a call centre is 3 days!) The states simply don’t have the people to handle the economic crisis. The complex logistics of supplying a developed nation mean that shortages and price increases are inevitable, until people run out of money when prices will crash and businesses will fail. All this could have been avoided with a bit of care.
In Italy, we are looking at a gradual re-opening: but it’s a bit of a joke. Everyone knows that COVID-19 is here to stay. The number of deaths far exceeds the official figure, but the media doesn’t really care, obsessed with the “official” numbers. COVID-19 will become endemic, something that can be handled with an improved health system. The same will happen in other countries. We will be left with the economic catastrophe where the sixth great lie continues to dog the debate (such as there is).
It is Easter week. Hotels and restaurants are closed. Italians will stay indoors. No barbecues, no going off to their second homes, no queues on the motorway to the sea side. Millions lost.
For the last two weeks all non-essential industries have been closed: billions lost. Thousands of self employed and people working on the black market will lose their revenues.
Giuseppe Conte estimated a loss of 6% of GNP this year, but he doesn’t really know. He has defined this as a European-wide problem to be faced by Europe as a whole, but here’s where the difficulty starts.
Europe, in the form of the EU has no tools to deal with this crisis; the 27 EU nations don’t agree on what the economic cure really is except to allow countries like Italy and Spain to make more debt by guaranteeing loans through the ECB. The 750billion promised by the ECB, the 500 billion promised by Germany, the 300 billion by France and the (potential) 300 billion promised by Italy are nothing more than guarantees to banks: debt. The cheap money is the death knell of healthy competition and favours big corporations who have a history of investing “strategically” often outside the EU. There is no guarantee that these loans will save European jobs.
Just as after the 2008 crisis the banks failed to support small businesses until their own books had been balanced, today the banks will be trying to recoup the financial losses from the stock market before releasing liquidity. The Conte government has allowed a wide range of strategic industries to continue: from agroindustry, to aerospace and defence, fishing, pharmaceuticals and many more, but however much they produce, the shrinking market will impact their and their suppliers’ profits.
What the extent of the disaster needs even greater analysis than I can offer here, but for sure, there will be more unemployment and less money.
The seventh great lie is the number of dead. I have read two articles in the Italian press (Bergamo Oggi and Gazzatta di Parma) and others in the international media that suggest that the true death toll is up to four times higher than recorded, based on statistics of deaths in previous years compare to this year. Four times, means that if the official Italian deal toll is 15,000 -ish, we are looking at 60,000. There are reports of 40,000 funeral urns being delivered to Wuhan (which would take the Chinese outbreak to 43,000 victims – Hubei province reported just over 3300 deaths). According the Britain’s The Guardian the reports from the National Health Service are unreliable, either because of delays in reporting or simply because many deaths aren’t reported as COVID-19 related. This opens up a whole new can of worms: what exactly are we reporting? Are definitions of COVID-19 deaths the same everywhere? Should we be suspicious off Germany and Switzerland’s low death rates?
The bottom line is that for the economy – which is what the living have to deal with – it doesn’t matter as long as the health system doesn’t collapse. But credibility of every single government in Europe (China’s public opinion doesn’t count) is on the line, as their failures and their lies come to the fore. That is the legac of the Coronavirus. More to follow. Much more.
Immagine you are sitting comfortably in your triclinium in, let’s say, Ravenna, when a slave comes in to announce a centurion has come to see you. It’s annoying. You were having fun and looking forward to going boar hunting in the afternoon. The centurion tells you that there’s an invasion of Huns. They are at the edges of the Western Empire and there’s nothing to stop their advance. In a matter of weeks they will be in town. General Aetius has ordered a curfew, a lockdown and his men are patrolling the streets, preparing the city for a siege. No boar hunt, oh, and no parties. “Just stay in doors, ok? we’ll throw you in jail if you don’t.”
It’s the feeling you get being in one of the most beautiful cities in Italy, the heart of fine living, the UNESCO capital of fine cuisine, where nothing really could be better except for the air quality, and all of a sudden you’re told that there’s this “thing” that could kill you out there, and the Centurions are patrolling the streets so you don’t get out and catch it. You are incredulous, angry, helpless, and even fearful, as much of the Centurions as of the “Hun”. Do you really trust the men in charge, have they got the right plan? Meanwhile soldiers are fighting obscure battles in remote places, and you hear that they are ill equipped, and have no reinforcements. Someone has scrimped on their armour.
The metaphore can be taken further. Disaster is on you, the likelihood is that Attila will pass by and head for Rome, or maybe he will go somewhere else, but you have to be prepared. Attila will come and go, but something has broken in the city. The poor will be poorer, the artisans are reduced to slavery to feed their children, so tax revenues will be lower, there will be less money to fix the roads and make sure the government buildings don’t crumble and acqueducts still work. There will be less security, old injustices will come back to haunt society. Maybe the slaves will revolt, maybe malnutrition and will spread disease. Life will get shorter and harder. The twilight of empire is on you.
The uncertainty is such that you wish it was all over, even if the Huns do destroy everything, let them do it and go. And where is that great empire to the East? Why doesnt Constantinople (Berlin) do something? The truth is that the Emperor in the East has his own problems and the collapse of your part of the civilsed world can be blamed on corruption and squabbling for the crumbs, for what is left of the feast that was the glorious past of Rome. Indeed, your Emperor knew this would happen (it’s a long story and involves Valentinian’s daughter Honoria poposing to Attila rather than marry an old senator) and he is found unprepared. He has the trappings of an Emperor but not the substance. He even undermines his own generals.
The COVID-19 crisis feels like this twilight of empire, even a Götterdämmerung. Everything around us looks the same, but the police are everywhere, armed to the hilt, they take the phone numbers of people they stop. We are told they can track your phone to check that you’re telling the truth about where you are going. “Quite right” say the loyal and patient people of Parma, but it gives me the creeps. Behind the scenes a complex political game is playing the COVID – 19 card and stirring distrust in Europe among the voters. The blame game has begun and the scapegoat is Germany. It is an uneasy feeling. I’m not sure everything will be OK.
Modern day illegal Centurions arrested by local police in Rome
Attila’s advance stopped on the Po river. His own army was devastated by disease, and then an army from Constantinople threatened his home base on the Danube in what is now Romania. Constantinople did not come to the rescue, but took advantage. Constantinople survived another thousand years and saved civilisation. Attila retreated. Aetius was later murdered by Valentinian in an outburst of jealousy. He was the only man who had a plan to save the West, and it involved a broad network of alliances, but his own success sealed his face and his death sealed the fate of the western Empire.
Attila burned Acquilea to the ground, but out of the ashes, the Veneti built Venice. It was a new beginning as something else. Fingers crossed.
Prime Minister GIuseppe Conte with Pope Francis, in a private audience. What did they have to say to each other?
Giuseppe Conte found time to pay a private visit to Pope Francis and one wonders which of the two is the guide and the other the observer in this Dante-esque Inferno. Now that we may be seeing the lights of Purgatory, is it ingenerous to be critical of the Italian government? If others are to learn from Italy’s mistakes, they’d better be honestly spotlighted. If the truth be said, there is only one government that was prepared: Germany. Not Italy, that has been the first to bear the brunt of the onslaught.
Let’s remember that there is no “enemy” attack, but just careless government. In a shock report by Milena Gabanelli in today’s Corriere della Sera, we read that Italy began ordering millions of masks from Italian suppliers on the 22nd of January, a month before the first signs of trouble. These ran out very quickly. Once the contagion had become an epidemic, Italian suppliers had to buy abroad, and not only prices began rising, but one supplyer, Turkey, actually refused to deliver masks that had been paid for. It was left up to private suppliers to buy them, there was no central purchasing authority. There was no rapid conversion of industry to make them here.
While Germany began with a sluggish response, once it swung into action around the 15th March, it was already performing 160,000 tests a week, and that figure has now increased to 500,000. People with mild symptoms can be tested at the general practicioner’s and the test is locally produced and locally analysed, making for a swifter reaction, and quarantine for healthy carriers. In Italy only patients with real sypmptoms needing hospitalisation get the test. The number of tests inevitably impacts the statistical proportion of deaths to positives and identifies healthy carriers, reducing contagion. Why aren’t the Italian government doing this? Germany’s plan may be poorly implemented, (some say) but it exists. It sems that Italy doesn’t have one at all.
Germany has 29 intensive care beds per 100,000 inhabitants, Italy 12.5. But even then with just over 4,000 people needing intensive care, there are still beds that are not being used. The French are shipping patients by high speed train to other parts of the country: why aren’t the Italians doing the same? Yes, austerity has eroded the health system’s capacity, but there’s no budget limit to common sense.
Why is it that Italy, although possessing one of the better health systems in the world, also has the second highest number of in-hospital infections after Greece (a third of all European cases, causing about 8,000 deaths a year) and how is this impacting the death toll and the stress on medical staff. How many COVID-19 patients are getting secondary infections in hospitals and how many hospital patients are being infected with COVID-19.
One of the wonderful yet today deadly aspects of Italian life is the grandma and grandad who commonly look after the children when mum and dad are at work, especially in the industrious north. This has made the elderly particularly vulnerable to infection by young healthy carriers. Could something have been done to protect them? 63 doctors have died, how was that allowed to happen?
As the generation that built Italy’s economic miracle in the 1960s is swept away, the blame game has begun. Big Bad Germany is blamed for not buying into Eurobonds and wild talk about “punishing the Germans” is circulating. Maybe an honest appreciation of what went wrong here and what went right in Germany would help ease tensions:
The German state collects taxes effectively and German families have about a quarter of the savings of the average Italian family. A strong health system is costly and Germans have paid for the kind of results they are seeing in managing the pandemic. There is no magic formula.
Germany has cut central government beaurocracy in handling health care issues and has left it to the local authorities, making reaction times to local spread faster (and getting test results back faster). Faster reaction mans less spread, catching cases earlier, saving lives.
Since the welfare state reforms of the 2000s Germany has run a budget surplus for years, giving the country the biggest warchest of all European countries: it didn’t fall into Germany’s lap, it was built.
Emitting Eurobonds is technically not in the mandate of the European Commission. The European Central Bank has already promised 750 billion Euros in Quantative Easing which will necessarily be scrutinised by Germany’s Costitutional Court. There is no institution suited to selling European collectivised debt, even if all 27 agreed and the German constitution forbids it. Do we want Germans to swing towards nationalism should Eurobonds be forced onto them?
Italy’s secret weapon is the laborious and inventive nature of Italians, along with their savings. I foresee that there will be no need for Eurobonds and the Conte government would do well to tone down the media pressure on the issue. Our children are already overloaded with our debt, do we want to pour more onto their backs?
The first victim of war is the truth. Nothing could be more true of the war against Coronavirus. There are still many questions that need asking and without playing into the populists’ hands, here are a few. The answers have been evasive, or false.
When did the Coronavirus reach Italy? The “Strange” pneumonia was around for weeks before the first case was identified in Codogno (actually there were 16 at the time) on the 21st February that led eventually led to the Lodi – Codogno lockdown. No one has confirmed or denied. Right now it seems an academic question.
What role did the Atalanta – Valencia match on the 19th February have on the spread of the disease to Bergamo (home town of Atalanta) and Valencia (where 35% of the Valencia fans are sick)? Undoubtedly it was a super time bomb, but money is money. They just didn’t know…..
What happened at the small “Pesenti Fenaroli” hospital at Alzano, in Val Seriana in the valley behind Bergamo on the 23rd February? The Accidents and Emergency ward was closed for a few hours when patients testing positive to the virus were admitted. It was then re-opened and became the hub of contagion. Why wasn’t it sealed off and why weren’t the a-symptomatic members of sick doctors’ families not also tested? There has been no direct link found with the Atalanta – Valencia match, but suspicion is strong.
At what point did the GOVERNMENT realise what was happening? On the 27th February the Mayor of Milan (Giueppe Sala) was repeating the slogan the Lega had made its own: “Milan Won’t Stop” (Milano non si ferma). On the same day Foreign Minister Luigi Di Maio accused the media of spreading disninformation, describing what was going on as an “Infodemic and not an Epidemic”.
Once the government realised what was happening what was the decision making process? This has never been explained. When did the “Wuhan approach” become orthodoxy and what were the POLITICAL calculations behind it? For sure, the health crisis has put the opposition into an ever narrower box on the one hand, and on the other blown away the EU financial straight jacket. This could not have come at a better time for the Giuseppe Conte government.
Why were doctors and nurses not given adequate protecive clothing? Why is Italy importing millions of face masks when Italy is one of the world’s largest textiles manufacturers? Why didn’t the government follow Korea’s lead and test millions – not just those arriving in hospitals – to identify and isolate them and save the economy? What happened to the Chinese couple who tested positive on the 30th of January in Rome and what role did they play? Why didn’t the government build a couple of Wuhan-like hospitals to keep the sick away from non COVID-19 patients? The hospitals, it seems, are working miracles, but also spreading the disease, not least among staff. Where are the field hospitals (The Alpini deployed one last week, they have 3)?
If the answer to the above is “a decade of austerity”, then why can’t the government move sick people to other hospitals, where there are more beds and less pressure on ICUs? The way they are doing it in France, with good results?
Why is the Italian government getting “help” from China, Russia, Cuba and Albania? Does the sixth most industrialsed country on earth really need this?
So much for the management of the disease, but the biggst single question is HOW MANY SICK PEOPLE ARE THERE REALLY? Here Wuhan docet: is it true that the death toll in China is really much higher than the Chinese government has declared? What is in the 42,000 funeral urns reported?
Ultimately this is a crisis of resources that risks being turned into a crisis of culture. One of Europe’s best health systems, in Lombardy has been pushed to the limit, when an industrialised country like Italy should be easily able to handle 4000 intensive care patients, and should be able to adapt to this temporary need quickly. The errors and the delays, the infighting between regions and central government have not only cost lives, but will cost many Italians their livelihoods. Ultimately it may tear the European Union apart. It has put the patience of 60 million Italians to an almost impossible test. The nations that looked on and did not take note may pay an even higher price.
Certainly the people of France, Spain and the UK should be asking why their governments took their time, why they deliberately waited until catastrophe was inevitable. To save money? To save their own jobs? And will Boris Johnson use this as an excuse to not come good on his wild election promises? Could some Doctor Strangelove have seen an opportunity to tighten their grip on power? In the terrifying world of Pinocchio, anything can happen….
Who will pay for he economic crisis that the COVID-19 pandemic will inevitably cause? And who is responsible? Two questions that are floating in the air and no-one really wants to answer yet. The first because no one really knows yet, the second because power holders who are responsible, are also dictating the narrative.
So, over and above the massive fall in demand estimated in the European markets (about a third in each country if French and Italian data are anything to go by) what will be the effects of the supply side shut down?
In Italy all non-essential production plant have been closed down. That includes some of the biggest Italian brands, from Brembo brakes to Luxottica glasses, Ferrero confectioneries and of course Fiat Chrysler and Ferrari. Along with these, their suppliers and their dealers. Some of the Italian strategic industries continue to produce – Fincantieri ships and Leonardo military and aviation. Of course the oil and gas ENI, pharmaceuticals such as Chiesi in Parma and food (Barilla for example). Some structures such as the Netslé plant in Milan, are closed because they can’t get vital supplies, such as glass.
There are three dangers associated with the closures:
Market loss: lead times to starting up again are long and expensive, while not all the suppliers of the suppliers will be up and running as fast as the big companies might hope. Some may even have stopped producing altogether, and just as the lockdown in China impacted many industries in Europe – such as the automotive industry – as the supply of vital parts dried up, so procurement chaos in Europe will continue to slow down the re-opening of industries. Inevitably the fastest off the bloc will get the lion’s share of whatever market might be left after the consumer crisis, and Europe’s internal market is still far from a level playing field. Assuming Italy is first out of the crisis and its financial package is adequate to a swift re-boot, the country may have an advantage.
Investment reduction: A key part of staying competitive in the market is investment in technology. With a reduced cash flow and difficult credit, the likelihood is that investments in technology will be scrapped, leaving the European industries exposed to either lower-cost or higher- tech competition (or both). Already the slow pace of investments following the credit crisis of 2011 has had an effect on Italian competitivity. The reaction of surviving businesses is likely be to reduce wages and try to find a new cost – quality balance, at a lower level. Unless, of course, the government steps in.
Credit: The supply crisis inevitably impacts credit and the credit ratings system produces a vicious circle even in fundamentally sound businesses: a dip in cash flow due to failed deliveries caused by close-down might impact the credit ratings especially of small and medium sized businesses, and less credit. The knock-on effect of the ECB’s quantative easing should assure credit to big businesses, but the small and medium businesses may still find credit hard to get.
Un- and under-employment: The third danger with the closures is unemployment. Where the government has stepped in to pay the salaries of workers that have been laid off temporarily, there is hope that no significant dent to employment will happen. However, the smaller industries – the machine tools industries, the packaging industries, the small artisans with little financial buffer, will have to shed workers, and that will fuel unemployment which will further depress consumption and consumer confidence. The International Labour Organisation is estimating that in the rich countries of the west, there will be between 7.4 and 14.6 million new unemployed in western countries, with a high figure of 24 million globally (22 million following the 2008 crash). This will be accompanied by a period of high rates of under-employment and wage cuts, as happened after the 2008 crisis, further depressing consumption and growth.
Stagflation: there is another nightmare scenario on the horizon: with collapsing supplies of consumer goods, there is a real prospect of price hikes. The supply-demand balance will be key to avoiding this, and governments will be pushed into price fixing. It is a delicate balance, as depressed demand leads to companies going out of business and a spiralling recession, while depressed supply (in proportion to demand) leads to inflation. Within the context of a stagnating economy (before the COVID-19 crisis)there is a real risk of a phenomenon known as stagflation and greater control of the economy by the governments to stimulate demand through budget deficit but at the same time controlling prices.
Finance market volatility is fed by panic. Although the massive state aid promised by the governments and supra-government institutions such as the EU and the ECB at first allayed the fears of crashing profits and so stopped the sell-off on financial markets following the first week of (partial) closure of the Italian economy, in-fighting in the EU about how to use the European Stability Mechanism (to which Italy and Spain are the 3rd ad 4th largest contributors, but complain of not receiving the support they need) has undermined confidence yet again. Volatile markets, panic and ultimately crash, deprive real businesses of credit at a time when they most need it. Stabilising the finance markets is essential to allow businesses to get over the coming recession.
There are obviously political implications in all this:
1) After two decades (four in the UK) of slimming governments, big government is back with a revenge. Digital technology is likely to make it even more invasive.
2) The European Union has shown itself to be little more than a club, with three factions. The North, the South and the East. The new commission is only just finding its feet and two gaffes by the two leaders have had devastating albeit temporary effects. When Christine Lagarde said that the ECB was not the forum to prevent spread, and the cost of Italian bonds soared, and yesterday Ursula Von der Leyen, said clearly that “Coronavirus Bonds” were not under discussion. The big obstacle to sharing the burden of debt that Italy, Spain and France, (especially) will be incurring is Germany’s constitution. Although the new EU Commission president did correct her statement saying blandly that the whole of Europe is searching for a solution, the damage to the status of the EU as an institution was done.
3) The fragility of the post 2008 recovery is clear for all to see. Italy’s growth was tiny, compared to Germany’s, because of the tight budget restrictions limiting government investments (although it has to be said that the ECB’s quantative easing helped Italy and Spain reduce their interest bills). The suspension of the European Stability and Growth Pact has allowed Italy to raise debt, but at market prices (again, guaranteed by the ECB).
4) Ultimately this will probably lead to a new round of protectionism, as European businesses will need time to get back up to speed to compete on the international market.
On a more optimistic note: a survey of 6000 businesses carried out by the Confindustria of Italy showed that although 67% (71% in Lombardy and Venice) found that the Coronavirus crisis did in fact impact their business, “only” 29% said that their turnover had been impacted, while 6% had felt supply side problems. 33% said they had not felt any impact on turnover, and 24% said the impact was negligible. However 19% said that the impact would involve streamlining their businesses and 12% feared they would not be able to make their year-end goals and so may be forced to downsize. 5% have laid off workers who now receive unemployment benefits. 26% said they were harmed by not being able to participate in fairs and markets.
According to the credit ratings company Cerved analysis, assuming an optimistic scenario of a return to activity in May and a 3 month re-start period, the overall loss of turnover of Italian businesses would be 7.4% with a swift recovery of a +9.6% turnover over the last 6 months of 2020, followed by a slower rise of 1.5% in 2021, with 220 billion Euros this year and 55 billion next, wiped off the balance sheets. 61% of the this loss would come from Lombardy and 47% from Lazio. Should the crisis last till the end of the year, the losses would be 17.8% with a return during 2021 of +17.5% in the first half of 2021 and a further loss of 3.3% I the last half, worth 470 billion Euros in 2020 and 172 in 2021. As a credit rating institution, Cerved is likely to be more pessimistic. The worst affected sectors are anything to do with tourism and transport, automotive and beauty.
So all-in-all, depending how long the crisis lasts, the long term damage may not be as bad as expected. The Italian government has said they expect a GDP drop of 6.2% at the end of the day, but have taken advantage of the crisis to re-draw the rules of the whole European Union.
Ultimately, the government itself is responsible for the disaster, by underestimating the risk and mis-managing the early days, but looks as though it is likely to reap a peace dividend anyway.
This is is a crisis of Intensive Care Units that despite Italy’s excellent health care, there are simply too few of under these truly exceptional circumstances. The Chinese built a hospital in 10 days. Three weeks in, Lombardy is still waiting for the old Milan Fairs building to be turned into a hospital. Could the whole catastrophe have been avoided by massivily buying in ICUs. There is more to this crisis than meets the eye.
Sources: breugel.org – Three Macroeconomic issues and COVID-19 (Leonardo Cadamuro and Francesco Papadia), voxeu.org: Supply Side Matters (Richard Baldwin), Cerved: gli impatti sui ricavi del COVID-19 sulle imprese italiane, Confindustria: Risultati relativi all’indagine sugli effetti del Covid – 19 per le imprese italiane. ILO: COVID-19 and the world of work – impact and policy responses.
The world was already heading for a recession before the COVID-19 outbreak. Growth forecasts had already been slashed. According to the OECD’s Coronavirus: The world economy at risk global GDP growth was forecast to be just 2%, with falling demand in Japan (with consumption tax increase and “Non performing loans and over leveraged corporate balance sheets weighing on investment in India.” Growth in China had also slowed, not to mention the sluggish Eurozone. The vicious circle of slow growth meant a reduced demand and impacted consumer sales, everywhere. Added to this is the uncertainty caused by the China-US tariff war, which carved out the lion’s share of China’s spending for the USA to the detriment of other industrial countries. In Europe the Brexit crisis also led to consumer uncertainty, and now getting a deal done by the end of the year seems almost impossible (even suicidal).
While the impact on supply of the China lockdown will be discussed later, the impact on demand has been catastrophic, especially in Asia. Chinese travellers have stopped going anywhere. Tourism accounts for 4% of the OECD GDP and 7% of OECD employment. China imports have dropped to next to nothing. Sales of German cars and Italian textiles have stopped.
In Europe, the failure of governments to follow Italy’s lead and lock down early will lead not only to a longer halt to production, but also to a brake on demand. One of the sectors massively affected is of course air transport, with an estimated 252 billion USD loss. This will be the subject of a separate analysis.
Italy: In Italy according to a report by the Centro Einaudi La recessione da Coronavirus – Ipotesi numeriche the fall in domestic demand in Italy, obviously dependent on the length of the lock down, is based on a premiss of an average of 2,571 Euros of spending per month for 26.1 million families. They estimate that between the beginning of lockdown (8th March 2020) and its theoretical (but improbable) end on the 2nd April, the demand for transport (-7.3 billion Euros), culture, sport and outdoors entertainment ( – 4.5 billion Euros) and the halt to tourism (-3.2 billion Euros), would all be slashed, and to a lesser extent clothing, telephony and restaurants/bars (now all closed) while investments would drop by 7.9 billion. The report forecasts a drop in exports of 8.7 billion, so a total loss of revenues for businesses in Italy of 41 billion Euros, about 1.9% of GDP.
If the lockdown is prolonged by another two weeks (probable hypothesis) household consumption would drop by 5.2 billion, investments by 13.3 billion and exports by 14.7 billion – taking the overall loss of revenue to 70 billion Euros (-3.2 GDP). That figure gets even worse with the extension to the 10th of May, with a GDP loss of 3.7 % (81 billion Euros). These figures are born out by an initial survey by ISTAT, the Italian statistics institute.
France: The same scenario is being played out in France. According the Insee, the French statistics and economic research institute, consumer demand has dropped by 35% over the last week. Only food seems to be growing (+6%) but other sectors (clothing, personal transport for example) have been slashed by 95 to 100%. Their estimate of impact on GDP is even more catastrophic than Italy’s – a drop of 3% if the crisis lasts just a month.
In France and Italy, the industrial area that seems less damaged by the crisis is the agroindustry, although transport of finished foods is more problematic. In Parma, Barilla is working at full speed to supply the needs of 60 million people who no longer eat out. Machine tool industries serving agriculture and food packaging are still working. It seems that in France too the same is happening.
Spain seems far worse off that either France or Italy. According to El Mundo, the government has still not put together a relief package, and seems to have been unprepared for the crisis on the medical front too. The promises of an unlimited source of funding from the ECB has not been translated into help to small companies. Friends in Madrid who run a small business have no source of revenue other than their savings. Like everywhere, without government guarantees banks will not lend to shuttered businesses.
Germany: Germany remains the biggest question mark. The country’s trade surplus had already declined in January 2020 to 14 billion Euros (from more tha 20 in 2017) with above all a 6.5% drop in sales to China and a 16.3% fall in sales to the UK. (source: tradingeconomics.com). According to a Rabobank estimate the German economy will shrink by 0.3% in the third quarter of 2020, a small figure compared with the French and Italian estimates, so probably under estimated, also given that Germany’s top three trading partners are China, France and Italy.
Unemployment and the EU: It’s probably early days yet, but the biggest issue will be unemployment when it is all over.
All the European governments have promised huge sums to combat unemployment or keep the unemployed solvent so as not to further depress demand. Supply chain disruption and depressed consumption cannot really be impacted by government action, so all the governments can do is build buffers. Unemployment figures were getting steadily better until 2019, but European economies were already slowing down before the COVID-19 crisis. We should expect a peak in unemployment as companies use the crisis to shed labour already headed for unemployment before the crisis. Add unemployment from companies in the tourism and hospitality sectors that close, we can expect a significant rise over and beyond what we saw after the 2011-15 crisis. In Italy that was 11%. The problem with the hotels and hospitality sector in Italy is the small buffers. The boom of small businesses (restaurants, bars, even kebab joints) that need low liquidity to set up, will be swept away because they live hand-to mouth. If they fail to open up quickly after the end of the immediate health crisis they will be easily swept away by competitors with deeper pockets or better economies of scale. This is particularly true of southern Italy. While in Lombardy, Veneto, Emilia Romagna and Piemonte the shut down has caused losses in cash flow but there is plenty of fat and generally good credit ratings with the banks, in other areas of Italy, temporary closures may mean loss of credit and ultimate closure.
Recession politics: A common index of what is to come is the PMI – Purchase Managers Index, which has fallen everywhere to around 30 – where anything under 50 indicates a low propensity for spending, a strong indicator of recession on its way. So it is the fear, the “sensation” that things are bad that make them even worse. Indicators of “confidence” are indicators of propensity to invest. The social cost of huge unemployment, especially in Italy, France and Spain, will have political consequences which explains the EU’s propensity to relax the rules. There are two hurdles that the new commission will need to overcome to give governments that flexibility. The first is a ruling by the German Federal Constitutional Court about whether the ECB is allowed to buy government bonds, a ruling due in July. The other is a hurdle to the abolition (temporary or permanent) of the Stability and Growth Pact, and comes from group of fiscal purists in the Eurogroup that is worried about the effects on multiple factors of the EU economy: intra EU competitivity (a factor the smaller EU countries are most worried about), the inevitable drop in the value of the Euro (an especially German worry), and draining of resources towards the more recent additions to the EU such as BUlgaria and Romania. The COVID – 19 crisis could well turn into an EU crisis. And that would be even worse.
Civilians breathe through an oxygen mask at al-Quds hospital, after a hospital and a civil defence group said a gas, what they believed to be chlorine, was dropped alongside barrel bombs on a residential area of Aleppo, 1916. Photo Reuters/Abduhrahman Ismail
This post won’t make me popular. The COVID-19 crisis makes us all angry at some time, for some reason. The sun is shining in my garden, I have a stock of wine and good food, but I can’t go out. Angry. The British government threw away precious time, failed to see the tsunami coming, listened to spin doctors rather than doctors. Angry. The generation that built our prosperity, the ones that fought the last part of the war (the one who resisted are almost all gone) and rolled up their sleeves to give their children a future, are dying: angry and sad.
But there’s an aspect that we, forget, obsessed as we are with the numbers of cases, the peaks, the death toll in the most prosperous regions of the world, and anxious as we are about our investments, or, for the poor and marginalised, the prospects of jobs, dire as they are.
We forget that two wars on our very doorsteps, wars that the West fomented, in Syria and Libya are killing so many more, in silence. Elderly Libyans (I know a couple) and Syrians live in cellars, and watch their children ripped apart by barrel bombs and rockets. Two teenagers yesterday in Tripoli’s old town centre. 400 thousand Syrians have died since 2011. More than all the Coronavirus cases in the world. Millions of refugees are pressing on Europe’s borders, not in search of welfare state, of hospital beds, or intensive care units, but more simply, a safe life.
It is amazing that the news cycle, all of a sudden, has forgotten these, just as it has forgotten the climate crisis and its impact on the South of the world (not to mention what the disease is doing there) and here we are, like dogs at the heel of our master, following the latest crisis that sheer ineptitude, (and I include the Italian goverment in this although they woke up earlier than others) has turned into “the big story”, with heroes who should never have been exposed to this kind of pressure (hospital workers), victims (our parents) who should never have been put at such risk given the information already available from China, and economic devastation that should have been forecast months, even years ago when austerity was eating away at the very social structures the same generation (the victims) paid for. The indignation for all of this is great. I hope that there will be a great indignation when it is over.
This is what Italy looks like after two weeks of lockdown; a lock-down without a close-down. Last night, at 11 pm Prime Minister Giusppe Conte annouced close down, the final blow to the economy. The new measures and this photograph could save lives elsewhere, and shorten the period of pain, if adequately understood. In the photograph, sixty coffins are being taken away from the cemetery of Bergamo to be cremated, without funerals. Many of the dead passed away without saying goodbye to their loved ones. Imagine this were happening in Reading or Bristol, or Philadelphia. This may yet happen somewhere in the UK, or the USA. Probably near London or New York. Once you get over the shock, however, time comes for understanding. This is not an earthquake, or a flood, it is not unexpected or unfathomable; it is a world wide pandemic that has been and can be controlled by human action. It isn’t even the Black Death, or Cholera, or Ebola. It actually kills very few of the infected. It can be contained using logic, discipline and above all applying experience gained elsewhere. Information is one of the key weapons and information is abundant, so why are governments making the same mistakes Italy made? So why is it devastating the economies of the western world?
Italy Why did the situation in Bergamo, and in Lombardy precipitate? Where did this come from? In Italy there is no “Patient zero”. Scientists now believe that the unusual spate of pneumonia that was registered in Lombardy, may actually have been COVID-19, but no one was testing for it at the time. After flights from China were cancelled, on the 30th January, COVID-19 testing began. “Patient #1” was a hyper active 38 year old from Codogno, a small town in the Po plain, close to Milan. He had an active social life, he ran marathons and was a manager at the local Unilever factory. He went to the hospital with severe ‘flu symptoms and refused to be hospitalised, only to return a few hours later with sever breathing problems. On the 6th of February, a high speed train had derailed near Lodi, not far from Codogno. Police and Carbinieri, and a lot of experts and even onlookers went to see. The spread of the disease among these people shows that the virus was already virulent at the time and in that area. The same law enforces were used also to quarantine the Lodi-Codogno area when the outbreak became manifest and the government attempted to confine it in this countrified area. Of course it was too late. On the 21st February the Champions League match between Atalanta, the Bergamo team, and Valencia was played in front of 45,000 people in the Milan stadium of San Siro. Today epidemiologists believe this was the first time bomb. The virus had spread to Milan, Piacenza, just across the Po plain and then to Bergamo and eventually to Brescia. The government made light, told people to go about their daily routines, and Luigi Di Maio, the foreign minister, told the press that there was more of an “infodemia” than “epidemia”. While Milan, today, with its 1.2 million inhabitants has over 5,000 cases today, the cities of Bergamo and Brescia, 120,000 and 190,000 respectively, have just as many and an even higher death rate. This is where geography comes in. They are both heavily industrialised cities, with narrow valleys running northwards from the Po plain, into the mountains, where the population lives in small towns and commutes to their place of work in the industrial estates in the plain. They are also routes people use to go skiing in the Alps. Until the 8th of March, when the Lombardy and partial Emilia lock down were announced, people went about their work normally, but in close proximity and without protection. Bergamo and Brescia, along with Milan, are also the places where Italy’s economic miracle was made in the 1960s. Th population that made the physical and mental sacrifices that got it under way, working long hours in poor conditions. Today they are the elderly who are suffering the worst. Of course, the air quality and the working conditions of the 1960s were markedly different at the time. Even if today the Po plain is known for its poor air quality, measurement of the PM-10 particulate started just over a decade ago. Smoking was also a widespread and accepted habit at the time. The state of the lungs of elderly people in the upper Po plain and alpine foothills is probably among the worst in Europe. Until the 8th of March, members of this generation of Italians remained active, looking after grand children as their own children worked, met regularly as families, or even lived together. The history and geography of Brescia and Bergamo created a lethal cocktail. So the numbers of infected people that almost doubled over the last two weeks may be due to both the way of life and the underlying health issues in the areas afflicted. Only today has the government closed down all industrial activities except for essential supplies for food shops. This is the second bombshell for the Milan – Bergamo – Brescia axis. Why did they wait so long? The reasons can be boiled down to three areas, assuming there was indeed a rationale to the decision making process. : Financial: Until the end to the Stability and Growth Pact, last Friday, the government did not know what leeway they had with spending. Yes, the ECB promised another massive injection of liquidity and yes, the European Commission had promised maximum flexibility, but there was no knowing where the limit was and the Lombardy region produces more than a third of Italy’s GDP (with just 16% of its population). Industrialists resisted closures. Political: the presidents of Lombardy, Veneto and Piemonte are all members of opposition parties. After resisting the closures at first, they began calling for a heavier lock-down, that the government resisted. So far the government as remained one step ahead of the opposition especially in the economic package it has put on the table. Giuseppe Conte wants to remain in control, with central government making the rules. Psychological: The shock of the lockdown, first in the northern regions, then Italy wide, was massive. Conte adopted a step-by-step approach, hoping that the nation would find a new vein of patriotism and all stay home. This was not the case. Thousands of people broke the ban, or found ways around it, reacting as Italians often do, to a government diktat by finding the loopholes, rather than understanding that this is a dramatically new situation and that individual behaviour impacts the whole of society. Two weeks into the lock-down, with no peak in sight, he had no choice but to tighten the measures as the number of intensive care units (12 per 100,000 population) run out.
That’s how we got to where we are. But what’s happening elsewhere?
Germany. With more than 21,000 cases (21st March) Germany is the third most afflicted nation with a startlingly low number of deaths. No one can quite explain this discrepancy (just as they find it hard to explain the high number in Italy). Probably this is due to the way deaths are accounted for. Germans who die of underlying diseases that are precipitated by COVID-19 infection, are not considered COVID-19 victims, while in Italy it is the other way round. Also Germany has 8 hospital beds per 1,000 patients, more than twice as many as Italy. The low death rate may be dangerously inducing Germany into a false sense of security. The German “Patient #0” has been identified as an automotive executive who came into contact with a colleague travelling from China who fell ill on her return.
France. Today 600 doctors began legal action against the government because the claim that the true nature of the COVID-19 outbreak was known well before the elections, that were held and the second round suspended. They claim there was a political reason for the government (represented by Edouard Philippe) to delay, and that this delay has made the situation even worse. However, it seems that the lockdown is wider than the initial lockdown in Italy, with the government promising to pay the wages of workers in shut down factories. Here the front line is Alsace. No “Patient #1” has been identified, but the contagion has, theoretically, been traced back to to a Briton who had come back from Singapore (in Val d’Oise), Chinese tourists and business people (Paris and Bordeaux) and people coming back from Lombardy (Alsace). The front lines are in Alsace and Isle de France the region around Paris).
Spain Spain is the worst hit after Italy, with 28,000 cases and 1700 deaths, but locked down just 10 days ago, probably five days later than Italy did at the same level of spread. The army is on the streets, and only essential production is under way. The preparedness of the national health system is slightly poorer. Italy has 12 ICU beds per 100,000 population, Spain just above 9 – although practically the same number of hospital beds overall. However, Spain’s population is much lower.
So the European Union has now suspended the European Stability and Growth Pact, a system that forced states to comply with rules on budget discipline set in Brussels. The pact was augmented in 2013 with the Fiscal Compact, making those rules even more stringent. Miles of text have been written on the strenths and (mainly) the weaknesses of the system. Today it has been temporarily abandoned, to allow countries already struggling with low growth rates to fight the COVID-19 pandemic with every tool available in the toolbox. Mainly debt, backed by the Eurean Central Bank and its new “Whatever it Takes” policy.
There are two key aspects to this breaking of the fiscal dam. Italy is no loger the only country whose economy will be heavily impacted by the pandemic. The whole Eurozone is affected, France, Germany and above all Spain are under attack. France has already broken ranks, and is promising to pay the wages of those temporarily forced to stay at home. Germany too, to a lesser extent, but the Germany state is far more liquid than France. Spain and Italy will be the main borrowers.
The EU has no choice but to follow this “fuite en avant“. Mario Monti, the fiscal purist, said today that time had come for Europbonds, so that the whole Eurozone collectively underwrites the debt of the countries struggling – a measure that was denied the “Latins” (Greece, Italy, Spain, Portugal) in 2011. Italy’s finance minister has been calling for Pandemic Bonds to be issued by the ECB. Whatever is decided, now there is even more cash on the table, albeit debt.
However it’s not only the immediate cash needs that are being delivered. Suspending the Stability and Growth Pact, once described by Romano Prodi as “unworkable”, may be the prelude to abandoning it altogether, so a complete re-think of the Euro project. After all the pain and suffering that Greece, Spain, Portugal and Ireland were put through, could it be possible that the new European Commission has a new imperative: keeping Europe relevant to the evolving gloal stand-off? The Eurozone is on artificial respirator equipment.
Wow. The unthinkable has happened. The UNESCO capital city of Gastronomy, Italy’s capital of culture 2020 has been placed in quarantine. This sleepy Italian town, the home town of authors and musicians, the little Athens as it came to be known under the Bourbon Dukes, the Po Valley town that punches above its weight culturally, is like any other. COVID 19 has struck and the city is in quarantine. A sense of anxiety seeps into social relations, suspicion keeps people distant where before they were warm, and the typical Emilian good humour is dampened almost to nothing. The Parma hams are still curing in the Parma river valley, the Culatello is still hanging in the damp cellars of the plain, the cheese is still maturing on the shelves of farm houses dotted around the hills of Parma and Reggio Emilia, but the spirit has gone. The city is an agro-industry hub and home to the European Food Safety Authority, or EFSA, and despite its quaint cultural side, also hosts important food industries such as Brilla, Parmalat, and Sidel (Alpha Laval’s bottling line industry), and Bormioli glass as well as hundreds of industries associated with food processing. The business is worth 1.5 billion of Euros in Parma alone, an industry that overall accounts for nearly 9% of Itay’s GDP, adding in food processing machine tooling, the proportion rises to nearly 14% (27% of the world’s agroindustry is located in Italy). In the years of crisis this sector pulled Italy through, with exports and cash flow. What will happen to this with the COVID crisis? What will happen if the goods can’t get to the world’s table? So where does the local community’s interest lie? There are two faces to this quarantine: the purely medical which requires the highest possible adherence to the rules – little or no contact between people, bars and shops empty or closed, reduced industrial activity and total isolation – the Chinese recipe; however the economic damage to the whole of Italy from the total closure of Lombardy and 14 provinces that produce 31% of Italy’s GDP would destroy the nation’s economy, so there is a grey area of tolerance: the institution that moderates this frontier is the Prefecture of Police. Mayors tend to want more tolerance, the government wants more rigidity because the hospitals are swiftly running out of intensive care wards. The front line is in the hospitals, with increasing numbers of medical staff falling ill, with more than 1000 new cases every day (only a small portion of which needs intensive care) the standards of medical care will be hard to keep up. The rest of the community seems to be detached from this reality, understandably more concerned with keeping the precarious economic recovery alive or just getting on with their lives. There is no cut and dried solution. So what’s the situation in Parma? quiet uncertainty. They are still pushing the boundaries. Trying to understand what they can and can’t get away with, wondering if they can go for a walk with friends, if they need to wear face masks to go shopping. The invisible enemy is still theoretical in most people’s mind. Some still think that this is no worse than the common ‘flu. Others live in permamnet anxiety. Anger and frustration on the part of businesses are balanced by fatalism on the part of many employees forced to take their annual leave early. Basically it’s business as usual except for people who have to leave the province boundaries. I expect this will change over the next few days.
Half a million more Italians are now living below the poverty line (Palermo, Easter, photo AGI.it)
Two Elephant and Mouse fables (One from the Congo and one from India) just prove that whatever is small and irritating can bring down a giant or save a giant. The story of the mouse and the Elephant can be read in many ways, but for us it’s back to work. Keeping a business afloat in the last 3 months hasn’t been easy. Getting through to people, getting decisions made has been slow. But it’s nothing like the excruciating distress millions of workers throughout the world have been through. Particularly haunting is this story in The Guardian. All over the world workers who live hand-to-mouth have been hammered by the lockdown, already nailed to the anvil of poverty. The Rampukar Pandit of the photo is one of tens of millions.
I ask myself: how long must this last? I try to bring my educated analytical mind to see the social patterns and try to forecast the outcomes, but the anger sometimes overwhelms the analysis: how can we let this happen? My mind casts around for someone to blame and the list gets longer by the day. Amusingly, in my last posts, I underestimated the human mind’s aptitude for creating chaos and, tragically, overestimated the ability of our politicians to lead us to safety.
Above all, this middle class West and its political representatives have utterly failed to comprehend the extent of the disaster and the wider ramifications beyond our gated community.
Let’s have a look at the numbers: 31,000 deaths in Italy, 34 (more like 50) thousand in the UK, 25 and upwards in France, 30,000 in Spain, 8,000 in Germany. Let’s say 150,000 deaths in Europe. So what should we be saying of the 400,000 deaths in Syria (and 7 million refugees), or the 500,000 deaths from HIV, more than a third of which in Africa according to the WHO, just this year!
The knee jerk reaction of politicians in Europe has been: first to minimise the unpopular situation, secondly to bow to opaque scientific committees; they have taken a hatchet where a scalpel was needed, they have been found ill equipped when they needed to be ready. Like the foolish virgins they burned their candles before the bridgroom appeared. And then, they expect us to follow their lead.
In Italy, the only opposition has been Lega, a party that can hardly boast success when you look at the Lega led Lombardy (different story for Veneto) and whose messages were almost more contradictory than the government’s. However, the centre “Left” (actually the “In power” party) and the 5 Star Movement government could hardly have made a greater showing of chaos.
In France, Emanuel Macron has had to apologise twice (at least he did) for his own government’s disorganisation, but, to his credit the government’s response has been flexible and subtle (some regions were more “closed” than others, the sick moved by special train or helicopter out of the overwhelmed areas).
In Spain Pedro Sanchez, in a coalition with Podemos, has found it hard to hold the government together, let alone protect health workers and make state aid effective. The worst so far has been the UK, where denial eventually led to lock-down and then, knee jerk again – opening up, behind an opaque and incompetent scientific committee, known as Sage. No debate (Admitteedly the Labour party was in the throes of electing a new leader) and above all the same medecine for everyone, the harder hit as much as the COVID19 – Free. A sledge hammer job.
None (except to e certain extent France) have admitted that this is a system crisis, not a health crisis. Only Emanuel Macron has admitted that hospital cuts impacted the state’s response to the pandemic. Neither Boris Johnson, nor Pedro Sanchez, nor Giuseppe Conte have pointed the finger at the massive social spending cuts of the years since the sovereign debt crisis of 2012. No-one has said that the inability of giants to respond to the virus adequately is a direct consequnce of the austerity brought in since 2012.
Big question number one will be: who benefited from the cuts, everywhere?
Legal challenges against the British, French and Italian governments for negligence have been brought: by Simon Dolan in the UK (Actually more against the opaque decision making process that led to lockdown); no less than 63 cases are being brought against the government in France; and in Italy the Noi Denunceremo Committe representing 50,000 plaintiffs have begun legal action against government and regions.
The French Parliament granted protection against legal action to all public figures outside the government during May and 17 members of La République en Marche have defected to form and independent parliamentary group depriving Macron of his overall majority, showing that consensus is waning. In Italy an attempt to pass legislation protecting the government against legal claims for manslaughter was blocked in Parliament after the sub-amendment was noticed by journalists. Politicians all over Europe are worried about their futures. Angela Merkel will not be standing as Chancellor again, so for Germany it’s “Après moi le déluge”.
Giuseppe Conte, in his April message to the Italians, announced that the “Recovery Fund” that he had so ardently pushed for, was in the making. Yesterday, Emanuel Macron and Angela Merkel announced that they would be pressing the EU to offer its very own bonds to the tune of 500 billion Euros: a de-facto Eurobond. Giuseppe Conte was nowhere to be seen. His own government is divided over accepting the European Stability Mechanism (no strings attached for health related investments). Ideologically, the 5 Star movement is against. The “State Minded” PD in favour. No need to mention the usual inefficiencies of the Italian state whereby only one out of six cash grants to those eligible has actually been delivered (and what do those cash deprived eligable people live off?). The Conte government is the first in trouble.
The consensus around Pedro Sanchez is also wearing thin. Podemos has made his negotiations with the confederation of industrialists almost impossible and he has shown no real control over the nation.
Britain has fared even worse. Boris Johnson seems simply not to know what is going on, and the Mayor of Manchester joined others claiming they were simply not consulted when “Phase 2” came into effect. Social distancing on public transport and in public offices takes days to arrange, but no forewarning was given. In the mean while, the UK will also be cut out of the 500 billion Euro recovery plan announced by Macron and Merkel (BTW Where was UrsulaVon der Leyen?) thanks to Brexit. Britain will be a poor country at the end of this year. Ta Boris! So much for levelling up.
Clearly, each government has sought to maximise consensus, using the tools of emergency legislation to best effect. The governments still do have a powerful weapon on their side: the mass media. In Britain there is no real revolutionary paper. Middle class values continue to hold sway, whether it be a little “Nicer” or a little “Nastier”. In France too, although the media can be critical, it stands aloof and can be as scathing of the opposition as of the government. In Italy, the country I know best, the situation is worse. No one dares state the obvious: the government is responsible for the worst economic crisis since the second world war and should go. Of course the alternative is “unthinkable” – Berlusconi and Salvini together. Sorry, and what about the vote?
That’s why the media consensus is: keep this government, however inept. Better the devil you know than the devil you know even better.
Big question number 2: when will we vote?
The problem is that the crisis that is about to hit the West is likely to sweep away middle class values as we know them and love them, making the “socialist/liberal” dichotomy entirely irrelevant.
I started this blog out of curiosity, quite enjoying watching a health crisis unfold and analysing what was happening in this sleepy little town, Italy’s City of Culture 2020. As its bars closed, the Piazza Duomo went silent, nature began coming back and the quiet country town returned to its pleasant ways of the 1980s. But that’s where the problem lies.
Big State = Big Debt = Big Corruption = Opaque power.
The new, probably more violent, political discourse will be between the “Ins” and “Outs”.
The 1980s were days of incredible social tensions, where left and right vied to distribute brutality to innocent bystanders. It was a period when the government changed all the time but was always the same (“plus ça change, plus c’est la même chose” as observed by Alphonse Karr in 1843). The consensus that “the alternative is worse” (Communist Party, Lega, Le Pen, Afd and in the UK the pro-Europoean-customs-union Labour Party) and “You can’t change horses in mid stream” means change is unlikely. We will continue to be ruled by scientific committees, and by well paid consultants (in Italy the cas célèbre is Roberto Burioni who said the pandemic would nevber reach Italy and now espouses harsher lockdown: his salary is subject of public inquest).
Big question 3: who really is governing us?
Governments believe in their absolute right to rule based on the most recent elections. They will prolong states of emergency, they will do deals with opinion makers, with the “scientific community” (although they have lost the confidence of the medical services, everywhere), but will not hold elections until the health crisis is over. They will cling to power, they will use the police, they will use mass media and they will use the churches to stay in power. Above all they will use fear among the impoverished middle classes of the inevitable deluge to keep the population “on side”. The deluge will take the shape of our own Rampukar Pandits. Not only will the destitute of the world, the Syrian refugees, the victims of global warming and of savage dictatorships, vote with their feet and come our way, but our own destitute will be on the streets when the necessary austerity holiday is over and the flood will grow.
VirItaly 