Tag Archives: eurozone crisis
One of the most brilliantly provocative pieces that our CSO has recently come across is Financial Times doyen Simon Kuper’s Smile if you’re European (3rd May 2013). Kuper convincingly posits that while the banner headlines concerning Europe pertain almost invariably these days to crisis and decline, the continent’s ‘terrible time’ is not necessarily one that looks so bad ‘compared with probably every other continent and any time in history’. The co-author of the wonderful Soccernomics cogently points to Europe’s exceptional paucity of large-scale violence, high life expectancies, relative lack of corruption perception and economic equity as reasons why life even in dynamic emerging markets will take a long time to catch up to what is considered ordinariness in the Old Continent.
Yet as convincing as Kuper’s analysis seems, after some reflection we at Mediolana believe that he has neglected to give weight to several factors which may point to a less benign future for the land mass that did so much to define much of the nineteenth and twentieth centuries:
1. Geography. Kuper is writing from Turin, home of Juventus and Fiat, and one of the most affluent and well-run cities not just in northern Italy but the entire world. A perspective from several other football-mad European metropolises – Madrid and Lisbon, let alone Athens – is pronouncedly different; in an uncomfortable number of countries, the European dream of tidy prosperity has already been annihilated.
2. Change. As those familiar with Asian and African history will no doubt be especially aware, great societies can and do go into astonishing decline which may not be arrested within any reassuring timescale. The dispassionate observer can see traces of this in countries such as Spain, which lost 2.7 million mobile telephone subscribers in 2012 and whose digital telecoms base continues to shrink. At the same time, the last few decades has seen the near-monopoly which the developed world held on the Wonders of Modern Life – such as metro systems, higher education and world-class ice-cream and coffee – eroded.
3. Generation. As someone born in 1969, Kuper would have had access to a normal jobs market upon graduation from university in the early 1990s. To anyone facing relevant unemployment rates of c.50%+ in countries as diverse and Portugal and Bosnia, the future prospects of Europe minus the chance for reasonable remuneration and capital accumulation will look decidedly different.
Back in 2007, our Creative Director & CSO Asad Yawar foresaw the rise of Turkey – something not even on the global international relations agenda at the peak of the Euro-American credit bubble – as having ‘far-reaching implications…for Europe, Central Asia and the Middle East’.
Since that time, Turkey has been the only major European economy aside from Germany and oil-rich Russia to come close to transcending the global economic crisis. But its longstanding trajectory of joining the European Union – a goal which was confirmed with Turkey’s official bid to join the European Economic Community almost exactly twenty-six years ago – does not look nearly as attractive as it might have done even five years ago. A condition of Turkey’s EU accession is the eventual replacement of the Turkish lira with the much-maligned euro; given the experiences of present eurozone periphery countries, where even sacrosanct pillars of private property such as bank deposits and gold have become collateral damage in a financial armageddon, it is doubtful whether a country which could in theory gain many of the benefits of European Union membership without actually joining would choose to take the obvious risk constituted by signing up to the EU.
With an ever-growing international reach – Turkey’s foreign aid budget nearly doubled from 2011 (US$1.3bn) to 2012 (US$2.5bn) – the state that contains the former imperial capital of the Ottoman Empire clearly has options regarding its future alliances. But what, if any are the alternatives to the EU? After some contemplation, we at Mediolana came up with the following:
1. Shanghai Cooperation Organisation. This international bloc – ironically headquartered in Beijing – is fundamentally a Eurasian security alliance. While the current Turkish Prime Minister Recep Tayyip Erdoğan has openly stated his keenness on joining the SCO, these sentiments do not appear to be shared even by other senior figures in his own AK Party, and it is easy to see why. Totally dominated by Russia and China and offering little in terms of environmental or human rights standards, Turkey would have little leverage within this grouping and would have no additional incentives at all to improve two of its (presently) weaker areas.
2. Organisation of Islamic Cooperation. Historically one of the great sleeping giants of international relations, the OIC should in theory be an arena where Turkey, which is already a member state, can further its goals. And from 2005 to date, a period when Professor Ekmeleddin İhsanoğlu has been Secretary-General of the OIC, Turkish influence within the organisation has been palpable. However, Turkey has not traditionally enjoyed a prominent position within a largely ineffectual organisation that has been characterised by the power struggle between Saudi Arabia and Iran. The forthcoming supplanting of the present Secretary-General by Saudi former journalist Iyad bin Amin Madani means that the OIC is unlikely to adopt a Turkish agenda in the medium term.
3. Turkish-Islamic Union. This is an international bloc which presently does not formally exist but which is being heavily promoted on A9, a Turkish television station established in 2011. This fact alone would not normally qualify it for serious consideration, but judging from the calibre of people from the worlds of academia, journalism, business and politics that have already been interviewed by this channel and who have expressed a desire to see Turkey take on this type of leadership role within the Islamic world, A9 seems to have an influence disproportionately large compared to its modest audience share. The main advantage of this grouping for Turkey is that it would get to design the institutional architecture from the TIU’s inception, which in theory could make it much more functional than, say, the OIC or EU; while the provisional name of the organisation is unlikely to inspire Arabs or Persians, the essential concept deserves consideration.
A bit like Russia Today, Press TV is an international news network whose rather obviously selective coverage of certain topics – particularly those directly concerning its purported backers – all too often obscures the fact that it puts out some genuinely superb content. A recent edition of Epilogue (16th December 2012), a book review programme hosted by the avuncular former Conservative Party MP Derek Conway and featuring Shabbir Razvi – the Founder and Managing Director of International Finance Solutions Associates – and the legendary Santoro Projects Limited head honcho Alessio Rastani.
Rastani, a man famous for telling us as much about the global economy in four minutes as most analysts manage in a lifetime of television interviews, pulled no punches as the presenter and panel discussed the 2010 John Lanchester classic Whoops!: Why everyone owes everyone and no one can pay. But one contribution in particular lingers in the memory as Rastani explained his fatigue with much of the media’s insistence on collective guilt for the ongoing global financial crisis: ‘The average person…will not sit down and go through the equations [that will lead to a crash]…I would say if there is a collective [element to the] fault, it is…95%…the banks’ responsibility, and the rest with the people.’
On many levels, Rastani’s statement is more than persuasive, and a reminder of why nearly 18 months after his fateful BBC interview he remains one of the most authoritative and cogent financial analysts anywhere in the world. However, we do wonder whether the people at large should – despite the indubitably incredible conduct of many of the globe’s financial institutions, and the governments that were meant to be regulating them – shoulder a slightly higher share of the burden:
1. No Questions Asked. Particularly in certain now familiar crisis-ridden polities – the tier-two eurozone economies, as well as the United States and the United Kingdom – many members of the public were all too happy to rejoice in the ‘good news’ of an artificial credit boom, lapping up endless programmes about property speculation and wolfing down both government and private sector Kool-Aid about how the ‘new economy’ meant that economic busts were the stuff of history books and funny-looking monochrome film from another era.
2. We’re All Bankers Now. As pondered over by Nobel laureate Joseph Stiglitz in another excellent 2010 tome, Freefall: America, Free Markets, and the Sinking of the World Economy, recent cohorts of the best and brightest students – particularly in countries hosting the major financial hubs of New York and London – have felt no higher calling than investment banking, with surreal power trips and telephone number salaries trumping any temptation to contribute to the commonweal.
3. Living High on the Hog. With financialised economies having squandered any pretence of moral authority in their quest to gorge ever-more stuff without so much as paying indulgences to the state, an ironically self-certified economic crash of gargantuan proportions was guaranteed. To make lots of money and fast – this was the only salient criterion that most people really cared about. But over five years on from the tangible beginnings of what may yet be the greatest financial crisis ever, has anything really changed?
Italy is presently making headlines because it is a country where a political party led by a stand-up comedian has just won the largest share of votes to the Chamber of Deputies in a general election (and where, some may posit, another stand-up comedian who happens to be a longstanding statesman is also polling strongly). But the backdrop of these elections continually looms over the polling figures: the Italian economy, Europe’s largest as recently at the early 1990s and still a key eurozone and G7 member, is faltering. Austerity measures forced through by the mysterious technocrat ‘Super’ Mario Monti have not delivered the promised land of fiscal respectability, and any entity wanting to push through stimulus measures or even leave the euro may find its path blocked by the twin towers of massive extant public indebtedness and a near-certain currency war.
How this hotly-contested election (or a potential re-run later this year) will pan out is anyone’s guess. But one barometer of one of the few potential sources of authentic growth for Italy makes for ominous reading. As the Financial Times reported in its recent article with a self-explanatory title - Immigrants abandoning recession-hit Italy (6th January 2013) – both relatively and absolutely recent arrivals to the boot-shaped nation are packing their bags prontissimo. The reasons behind their departure are telling, and comprise a sobering warning to other EU economies which forget the immense value that migrants bring to their economies – not to mention their societies – that in an era of unparalleled economic globalisation and flattening, people – migrants included – increasingly have options:
1. What’s a Job Again? ‘No business and no work. It is a terrible situation.’ This is the refrain that characterises the situation faced by huge numbers of agents in the Italian economy. Living in a First World country may have little meaning if there is no way to make a living – and immigrants to Italy from rapidly-developing nations such as China are cutting their losses and heading back to Asia.
2. Fighting them on the Beaches. In recent years, Italy has become synonymous with a crude racism that is not befitting of a land that has traditionally been an important mediator between Europe and the exotic East. Ignoring dead Roma girls whilst sunbathing, treating African-heritage footballers as subhuman and exhibiting visceral hostility to Yugoslavs, Albanians and Maghrebians are just a few examples of this trend. But immigrants are well aware of how they are perceived. As many as 800,000 of them may have left Italy in recent years without cancelling their household registration, meaning they are still officially in the country; these ‘ghosts’ may haunt the Italian peninsula for many years to come.
Unlike the Mediolana CSO Asad Yawar, most commentators – economic or otherwise – did not see the ongoing global financial crisis coming, and are as surprised as anyone to see affluent European countries such as Spain slide into what we have termed (and will soon flesh out in more detail) as a New Second World. But Mediolana’s CSO has long seen ominous signs in the Spanish economy since his first visit to the country in 2002.
Travelling to the Andalusian tourist triangle (Sevilla-Granada-Córdoba) during a blistering summer, our CSO noticed one or two things aside from the remarkably long queues at the entrance to the Alhambra Palace:
1. 1492-1992. Andalusia – one of the most dynamic places in the world during the Middle Ages – is a fixture towards the foot of modern Spain’s economic league table. Still, Yawar did not expect to find cities where between the expulsion of the Moors and the commencement of serious EU sweeteners, nothing much of note seemed to have happened. Particularly striking were the bus stations, ramshackle products of the pre-EU second and third quarters of the twentieth century which reminded our CSO of nothing so much as why Yugoslavs traditionally regarded their economy as superior.
2. Deep Structures. 2002 was a time when any half-sentient Briton could walk into a bank, lie about their income and have half a million pounds deposited in their account faster than the responsible teller could say ‘commission’. Rules about this sort of thing were tighter in Spain, but still: the good times rolled. Income was disposable and cash was flashed, yet a few enquiries in and around Granada revealed a real unemployment rate of around 40% in Andalusia – similar, ironically to that existing in much of the former Yugoslavia, except without the alibi of a recent war (and lavish EU members-only funds).
3. Euro-pa League? An impecunious Yawar (as well as his better-heeled travel partner) found the cost of the holiday eye-wateringly high, as everything from restaurant bills to accommodation tariffs – freshly priced in euros, with the peseta having been dumped at the end of 2001 – seemingly having at least one zero too many. When tourists are reduced to slumming it in Albaicín, one can be sure that the locals going to find the majority of stuff a tad price elastic – with both production and consumption cycles prone to the odd death spiral.