A Crisis is Born in Italy

Well as almost everyone must surely know by now, Romano Prodi’s government resigned earlier in the week. The present situation is still far from clear, with President Giorgio Napolitano holding urgent consultations with the various interested parties even as I write. Since my interest in Italy is largely an economic one (see accompanying post to follow this) and since I do not consider myself to be any sort of expert on the Italian political process, I asked Manuel Alvarez Rivera (who runs the Election Resources on the Internet site) and who is a political scientist with detailed knowledge of Italian politics for an opinion. Below the fold you can find what he sent me.

At the same time anyone inside or outside of Italy with a different take or perspective please feel free to add something in the comments section.
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The Economics of the German VAT Hike

I am very happy to be back here at AFOE, if not only, for a brief one-stop guest post about the economics of the German VAT hike and more specifically how market commentators and analists might just be reading the German economy somewhat falsely at the moment in the sense that they are not taking into account the implications of the sustained and evolving process of ageing in the German society. Indeed as Edward noted just a few days ago here at AFOE we might actually be talking about a clash of paradigms or at least a clash between two ways of looking at and interpreting the economic data coming out of Germany and indeed of the entire Eurozone. There are consequently many venues on which this diagreement is fielded and an important one of these is the German economy and more specifically the significance of the VAT hike and below the fold I will give my view on this topic.
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Serbia: Elections at last

So Serbia has finally called for elections.

I admit that I was wrong about this government’s tenacity. I predicted back in July that the government would collapse in October. Not so. It has staggered on, month after month… gasping, retching, coughing blood, but somehow refusing to die. It bought a few weeks by holding a referendum on a new Constitution, which was pretty useless but got voted in anyway. Then G17 — the liberal technocrat Europhile party, the smallest member of the ruling coalition — gave the government a few weeks more by the Kafkaesque maneuver of having all its ministers resign, but not actually leave office until the government accepted their resignations. Which took nearly two months.

But anyway, elections are coming, and a date has been set: January 21, 2007.

So what does it all mean?
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Just one more gelato

Two entries in three weeks? It’s surprising we’ve even managed that much. Come on. It’s August. We’re in Europe. We’re all away from the computer and you should be too, enjoying the final hot, sweaty gasps of summer.

But if you just can’t tear yourself away, here are a few tid-bits from my corner of things.
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Photographs on the fence

If you’re ever in Pristina, capital of Kosovo, you’ll want to swing by the Government building.

(It’s called the Government building because, well, that’s where the government is. The Parliament, the Prime Minister, the President, and half a dozen or so government agencies are all squashed into one huge building downtown. It’s sort of refreshing. Imagine being in London or Berlin and just popping down to “the government”.)

Why? Because there are these photographs. Between two and three thousand of them… closer to two, I think. The government building has a fence around it; and, since the building is pretty large, the fence is easily a couple of hundred meters long. And it’s covered with the photographs of Kosovar Albanians missing in the 1999 war.

It’s not a very cheerful display, obviously. But it’s certainly food for thought. And if you walk the length of the fence, you’ll spot some patterns.
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Sarkozy to the rescue?

The prospect of Sarkozy replacing Villepin as French Prime Minister has apparently been given a significant boost today, with a close aide of Sarkozy saying his boss could accept such an offer, provided he is allowed to carry out his (and not Chirac’s) political agenda.

Now, maybe this won’t come to pass (and I’ll argue below that it probably won’t). But it is worth recalling some recent history to show how extraordinary such a move would be.

It is not just that Chirac had considered Sarkozy a traitor since he chose to support the presidential bid of (then Prime minister) Edouard Balladur in the presidential elections of 1995. It is also that Chirac has done everything in his power to impede Sarkozy’s rise to power since 2002. In 2004, Chirac battled behind the scenes to try to foil the takeover of his own UMP party by Sarkozy, then the popular Minister of the Interior. When that didn’t work, he ordered him to leave the government, on the theory that having the head of the main party of the parliamentary majority in the cabinet would sap the authority of the Prime Minister (conveniently forgetting that Alain Juppé, a long-time Chirac protégé, was at the same time president of the RPR and Foreign Minister from November 1994 to May 1995).

That theory did last less than a year, since Sarko was back in the government after the failed referendum on the EU constitution in late May 2005. But Chirac ignored the calls of his parliamentary majority to name Sarko Prime Minister and went for Villepin instead, with the hope of making the latter a rival to the former for the next presidential elections. Asking now Sarko to replace Villepin would then be tantamount to a declaration of surrender on Chirac’s part.
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French protests : it’s the politics, stupid!

There are some offers you can’t refuse. An invitation to join the permanent roster of Afoe is one of them. Let me first say, then, that I was initially happy and thrilled and grateful to be part of this wonderful blog. All the more so since it means that I’ll be ineligible for the Afoe Awards next year, and thus spared the humiliation of a third crushing defeat in a row. (For those of you who are scratching their head and wondering “who the hell is this guy?”, check this post)

If is say “initially”, it’s because, as the French guy of the team, I now have the daunting task of trying to explain clearly our current social row over the Contrat première embauche (First job contract) to a mainly non-native readership. As it happens, the BBC has already done a quite decent Q&A on the topic. So go read it to get the basics. And then come back here if you want my long and -I hope- not too muddled thoughts on what it all means.
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Clues

This is not an analytical “perspectives” type post. Just a number of bitty threads that seem in one way or another worth noting (small pieces loosely joined). They could basically be grouped together under the following headings: photos, suicides, explosives and origins.

Maybe I should also point out the obvious: that living in Spain while coming from the UK gives me a rather unusual perspective on what is happening. I lived the days surrounding the Madrid bombings intensely, now I am doing the same with London (where I had my home for many years). In some ways I can’t help but see this in terms of similarities and differences.

The big difference is of course in the government reaction, and the way that this is transmitted to a wider public. The British official reaction is one of ‘containment’ in every sense of the word. I think this is a good approach, since I think that excessive shock and panic only serves the purposes of the terrorists. The overall sensation was that London was as prepared for this as it could have been, and that many of those working in the crisis management and emergency services areas were following through on already well rehearsed roles.

Things in Spain couldn’t have been more different.
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Hungary: New President & Debt Downgrade

This week Hungary has a new President. The election of Laszlo Solyom as Hungary’s new President was a major setback for the governing Socialist Party (MSZP), at the same time as it was widely lauded as a victory by the right wing opposition Fidesz party. The outcome was largely the result of the behaviour of the MSZP?s junior coalition partner, the liberal leaning Free Democrats, who abstained. Katalin Szili, the MSZP choice, was regarded by Free Democrats as being far too involved with the MSZP. Only 3 votes separated the two candidates, and this reflects the current balance within the Hungarian parliament between Fidesz and MSZP ? a handful of independents and the Free Democrats in fact have the deciding votes.
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Rumours

The Independent reports a ‘government source’ in Kiev telling their reporter that plans are afoot to try and connect the opposition forces with a terrorist attack:

Ukraine’s embattled government is ready to stage faked terrorist attacks to destabilise the country and discredit the opposition ahead of a rerun of the presidential vote, a senior government source has told The Independent.

The official, who works for the government of the Moscow-backed candidate and current Prime Minister Viktor Yanukovych, said: “One of the plans is to blow up a pipeline and blame it on opposition supporters. Ukraine is the key transit country for Russian gas supplies to the West.”

Mr Yanukovych’s backers fear the prospect of their candidate losing to Viktor Yushchenko and are ready to plunge the country into economic chaos, the source revealed. “They are planning to use criminals – plain bandits – that they have a hold over.” The source said that a senior member of the government had been tasked with overseeing terrorist acts.

There’s also talk of potential financial chaos in Ukraine because of the protests:

Supporters of Mr Yanukovych and the current President Leonid Kuchma will also seek to play on fears that inflation will wipe out people’s savings as it did after the disintegration of the Soviet Union.

There has already been a run on banks and black market money changers are returning to the streets with far higher dollar and euro exchange rates.

The government has already suggested that it will not be able to pay pensions and government salaries in December, although the opposition claims there are adequate reserves to pay everything.