I’m often asked why Italy is in such deep trouble given its reputation for design across all types of products – from clothes and furniture to luxury brands such as Ferrari etc. The answer is actually very simple and best explained with a couple of examples. Fighting broke out in the Italian House of Representatives today (which is not unusual – members are either fighting or looking at scantily clad women on their iPads!!) following sarcastic remarks aimed at a party leader’s wife, namely Mrs Umberto Bossi who at the ripe “old age” of 39 has now retired as a teacher on a full state pension. Her husband, Umberto Bossi is leader of one of the minority parties currently propping up Silvio Berlusconi and surprise, surprise Mr Bossi is also vehemently opposed to any reform of Italy’s arcane and archaic pension system. Given that average life expectancy for women in Italy is around 90 Mrs Bossi can expect to receive her pension for over 50 years. The maths are not difficult. In addition as Italy’s birth rate one of the lowest in the world – where is the cash going to come from to support Mrs Bossi in her dotage?
Another example of bureaucracy and the general torpor which surrounds anything to do with local government can be found in planning rules and regulations. My mother’s neighbour in Italy has had to wait over 2 years to carry out some minor modifications to her house. Her local “comune” or local authority approved her plans but because the town is part of a National Park, the Park authorities too had to be consulted before any work could be done. This “consultation” actually meant my mother’s friend visiting the Park authority offices on a weekly basis and asking the same question each time: “When are you going to consider my application?” Her answer? “Come back next week?” But not in August because everything shuts down for the summer!!
Meanwhile the markets remain remarkably sanguine as eurozone politicians attempt (once again) to postpone the Day of Reckoning for the euro. Yesterday was supposed to be THE DAY when a debt deal would be finalised. However, it seems no one told Angela Merkel who said, without any trace of irony, “the work’s not been done yet”.
From a technical perspective it’s no great surprise to see the euro so volatile, especially against the US dollar, and at time of writing the eurusd is once again testing the underside of resistance of the important 1.40 region but with news this morning (at 4.00 am GMT) that a deal has been reached on Greek bonds this just may be the catalyst to push the eurusd through this key level.