Tag Archives: political economy

Europe’s Italian Crisis

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Europe is a-roil over Italy’s inability to form a government at any time since the nation’s elections some months ago.  And so is the old guard in Italy.

Italy’s woes rippled across the eurozone, driven by investor worries that an exit by the bloc’s third-largest economy could force others out.

Bank of Italy Governor Ignazio Visco said this with a straight face:

We must never forget that we are only ever a few short steps away from the very serious risk of losing the irreplaceable asset of trust[.]

They’re risking losing that trust, anyway, on the political front—from which flows all economic trust.  The Italian Old Guard is in the way here.

Italian President Sergio Mattarella blocked the formation of a euroskeptic coalition government formed of the antiestablishment 5 Star Movement and the League parties, raising the prospect of new elections.

He perpetrated the decidedly anti-democratic move of refusing to allow a coalition of the two parties who won the election to form a government because he personally didn’t like their finance minister nominee.  I would have thought Italy would have had done with fascism.  And so, sub rosa, would many in Europe, it seems.

And there’s this, based in no small part on those erstwhile coalition parties’ shared lack of enthusiasm for eurozone membership:

Italy hurtled toward a political crisis that is reigniting debate over Europe’s future, including whether the eurozone’s third-largest economy should remain in the currency union.

They’re worried that an Italian exit—if it actually were to happen—would spell the end of the currency union altogether.

Which brings me back to that matter of trust.  Having blocked the formation of a government, Matarella has virtually guaranteed new elections soon—there are no other possible combinations of Italian parties capable of forming a governing coalition.  And those new elections, given who won the last round, will surely be less an election of a new government and more a national referendum on whether Italy should remain in the eurozone.

Of course, Italy should not; they’re a terrible match for that currency union.  Italy, along with Portugal, Greece, and Spain—the original PIGS—should form their own currency union.  Those four nations’ philosophies concerning the purpose of money and of government’s role in society are much closer to each other’s than they are to the rest of Europe’s.

Australian Trade with the PRC

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Australia is finding much of its exports to the People’s Republic of China piling up in PRC ports (Australian wine is the proximate subject of the WSJ piece at the link)—not because the customers no longer want them but because the PRC government objects to Australian policies designed to limit PRC meddling in Australian domestic affairs.

From that, there’s this remark by Rob Taylor, the piece’s author:

Australia faces an awkward diplomatic balancing act in trying to address concerns about political interference while relying heavily on China for its economic well-being.

Stop being dependent on the PRC for trade. It’s as dangerous to be dependent on a single trading partner as it is for a business, or a nation, to be dependent on a single product.

There are lots of other markets around the world—and throughout Asia—for Australian goods and services. It’ll be expensive for Australia to wean itself off the PRC, but the payoff will be well worth it.

Other nations doing business with the PRC should consider the same weaning. After all, what’s the value of a large potential customer base when its government uses that connection for an economic Anschluss?

Out of Touch?

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President Donald Trump signed three Executive Orders impacting public service unions.  One of interest to me is this one.

The third restricts how much on-the-job time federal employees can spend on labor-union duties.

Naturally, the unions management teams are in an uproar over the requirement to have their members spend their work time…working.

Time an employee spends on union activities is time not spent on the work for which the employee was hired.  Union activity work is an additional duty requested by the union; it needs to be done entirely on the employee’s own time.  This restriction is a good start, but the union task time needs to be eliminated altogether from the employee’s work time.  The Federal government—all employers, come to that—hire individual workers, they don’t hire unions.  Unions aren’t temp agencies that provide workers.

Aside from that, this is just a variation on featherbedding.  Time committed to union activities during an eight-hour work day often runs to three hours.  If the work needed can be done in five hours, rather than eight, by the current subset of employees who are committed to union tasks as well as employer work, this suggests that the work required, if done exclusively, can be done with as much as 37% fewer such (union) employees.

Is public service union management out of touch?  No, just privileged.

Compensation

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Germany has decided to compensate two major utility companies for the government-forced shutdown of their nuclear power plants, shutdowns caused by government diktat, not by any plant failure or unsafe performance.

Sometime in the future, that is, in an amount to be determined.

The precise compensation sums depended on the development of electricity prices in Germany, the government said, adding that a concrete figure could only be calculated in 2023.

Those electricity prices already is rising rapidly from the loss of cheap, reliable electricity sources—coal-fired plants are being forced to close, too, in favor of wind- and solar-generated electricity.

The cabinet’s decision Wednesday was in line with a 2016 ruling by the Federal Constitutional Court in Karlsruhe, which said that the utilities in question were entitled to compensation for investments rendered useless by the government’s drastic change in energy policies.

Who, though, will compensate the German people for the much higher costs they’ll have to absorb for electricity for their homes and businesses?  Those higher costs will come from unreliable wind-sourced energy as winds often exceed the limits of the windmills used to generate electricity—or winds that don’t blow sufficiently.  Those higher costs will come, also, from solar energy produced in cloudy Germany.  Those higher costs will come, also,  from energy storage facilities that don’t exist yet, even in a demonstrable design stage, but are necessary to span those periods of no energy production.

Student Loan Delinquency

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…rates are declining.  Or so a headline number implies.

The share of new delinquencies on student loans has fallen to the lowest level in more than decade—and it’s not just due to the healthy labor market.

In the first quarter, slightly over 9% of student debt outstanding was newly delinquent….

Aside from employment rates, which encourage jobs as trade-off for college, the decline is laid off to a couple of causes.

[F]forbearance[] allows borrowers to go months without making a payment while remaining in good standing on their debt.

And

[I]ncome-driven repayment[] sets borrowers’ monthly payments as a share of their income….

These are legalist sophistries only; the debts still aren’t being repaid along the timelines nominally agreed.  The lenders—us taxpayers—still are being hurt by these legal shenanigans, and there’s no real expectation that these loans actually will be repaid, even in the long (much longer) run.  Nor is there any serious hope that the opportunity cost of the forgone monies, tied up as they are in those practically, if not legally, nonperforming loans, will be repaid at all.