When You’re Done You’re Done

You know I’m sure most of you think my constant references to Argentina in the context of Italy’s economic problems is troubling, possibly even irritating. You may well be right. I have to say that I followed Argentina steadily from 1998, waiting to see the inevitable happen. The principal problem was, lets be clear, the 1:1 dollar peg. This was the epoch of the internet/ICT boom, and a rapidly rising dollar. It’s not clear to me at all that had Argentina pegged to the dollar in 2002 it would have had the same problems so quickly. One of the problems with being attached to a rapidly rising currency is that your imports get cheaper, and your exports dearer.

Now for an apochryphal story. Late in the crisis, before the geyser finally blew, back in early December 2001, a friend of mine visited Argentina. Seeing some nice shoes in a shop window he entered the shop (you will remember Argentina was famous for its leather products: all those cows). On asking where the leather came from, he was informed ‘it’s from Brazil, Argentinian leather is too expensive’. One month later it was all over bar the shouting. Well…..

“When imported Chinese shoes cost less than the leather Italians need to make a pair of loafers, you know one of the country’s historic industries is in trouble.”

Of course I’m not saying Italy is on the brink of collapse, or anything similar. I am saying it is in deep trouble, and it’s hard to see a way out.

More on this here.

Incidentally, Berlusconi himself may be bailing out.

With the Italian economy stumbling into recession, the businesses of the country’s media mogul and leader, Premier Silvio Berlusconi, are a rare bright spot………….heir strong performance, led by Mediaset SpA, Italy’s largest private broadcaster and the jewel in Berlusconi’s crown, recently produced a huge windfall. With the April sale of a 16.7 percent stake in Mediaset ? after the company’s shares had risen steadily for months ? the premier netted a cool 2.1 billion euro ($2.6 billion), figures released by Berlusconi holding company Fininvest showed.

The premier said the sale of the Mediaset stake was in line with the company’s policy to “create value, ensure growth dividends and increasingly open itself to the market.” But the company’s current managers, including Berlusconi’s eldest daughter Marina, have offered no hints about how the money will be spent. “We will evaluate with the greatest calm where and how to use it,” she told the newspaper Corriere della Sera in a rare interview shortly after the sale. Fininvest said Monday that the position still stands. One possibility, according to analysts, is expansion outside Italy, including the possible purchase of a network in eastern Europe.

And while ‘daddy is away on business’, who might he leave in charge, well, there’s always Mr Lira.

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".