Sep 10, 2012

ECB moves to save euro all tripe to Sicily sellers

As the European Central Bank was announcing its ambitious plan to save the euro late last week, Giovanni Calabri was wondering how to feed his family in the heart of Italy’s troubled south, writes Josephine McKenna.

As the European Central Bank was announcing its ambitious plan to save the euro late last week, Giovanni Calabri was wondering how to feed his family in the heart of Italy's troubled south. Traffic was quiet on the streets of Palermo as the 53-year-old school janitor and hundreds of other workers protested in the Sicilian capital after their contracts expired at the beginning of September. "I have a wife, four kids and a housing loan, what am I going to do," Calabri told Crikey. "If I can't get a salary I will put a rope around my neck and go hang myself over there in the square." The square over his shoulder was a stunning baroque model that evokes the splendour of a bygone era. Filled with nude figures once considered so shocking it earned the nickname "piazza of shame", it seems the right backdrop for the workers' banner which says: "Where are the Sicilian politicians? Rome! Shame on you!" Shame indeed. With its €5 billion debt, organised crime and bloated public sector Sicily was teetering on the brink of bankruptcy in July. And there are still fears that it could send the rest of the country spiralling into the economic collapse already seen in Greece. "We are at the beginning of a terrible new era, we have no money," another protester said. In July Prime Minister Mario Monti took control of the region's finances after credit rating agency Moody's downgraded the island and local governor Raffaele Lombardo was recently forced out. Now new elections are to be held in October. These workers are bearing the brunt of the austerity measures the Prime Minister introduced since he took control of a technocratic government last November, but they are not the only ones. Unemployment is now running at 10.7% nationally and it is much higher in the south where there is often an ingrained cultural expectation of public funding. On Friday, Monti said Italy had avoided economic collapse due to the "sacrifices of Italian citizens" and recovery would occur if everyone was committed to work together. "Italy has skirted the precipice and is a vibrant and credible force, " he said. The European Central Bank clearly expects Monti to hold firm on his pledge to restructure the country and enforce reform no matter how painful. In fact, reform is required under the ECB president Mario Draghi's proposal for an unlimited bond-buying program to save the euro through outright monetary transactions or OMT in order to protect troubled countries such as Spain and Italy from the debt crisis. Back in Palermo that goal seems more like a pipe dream as you stroll through the city's famous Ballaro market. Despite bargain prices -- five eggplants for a euro; a kilo of peaches for the same price -- many of the stalls are empty and the vendors are complaining there are no customers. Pippo Gioe has been selling tripe and the other unrecognisable organs of cows and sheep at his family stall since he was a child. The youthful looking 56-year-old also has a pot of tripe on the stove out the back with a couple of stools for his clients. Like the protesters he has no doubt about the reason for Sicily's demise. "They don't want to send us any more money," he said. "Things are bad, and they don't want to help us." While there was an outcry about the ECB's proposal in Germany, most Italian economists have welcomed it as a step in the right direction. Investors had been waiting for action from the ECB and financial markets reacted favourably to Draghi's plan on Friday. But there is still a long way to go and investors have very short memories. The proposal will require the approval of various parliaments and leaders are waiting from a crucial ruling this week from the German constitutional court on whether the ESM fund is acceptable under German law. In Rome the big question is who will follow Monti and whether his reforms will disappear when national elections are held early next year? The technocratic leader is in charge only until Apriland political leaders across the spectrum are already sparring with each other over their alliances and what comes next. On Sunday Erik F. Nielsen, global chief economist at Italy’s largest bank Unicredit, was confident Monti would be shrewd enough to look at sovereign funding costs, volatility and opinion polls before he leaves. "He’ll have a good sense of what conditions will be required for a memorandum of understanding with the EFSF/ESM and he’ll get that done," Nielsen said. "And the risk of backsliding on the Monti reforms will have been reduced measurably." Maybe.

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3 thoughts on “ECB moves to save euro all tripe to Sicily sellers

  1. Malcolm Street

    Have a look at this recent article in Der Spiegel re. Sicily – they’ve made their own bed and serves ’em right to be lying in it.

  2. David Hand

    “Like the protesters he has no doubt about the reason for Sicily’s demise. ‘They don’t want to send us any more money,’ ”

    Yep, a perfect encapsulation of the death spiral the European economy is in – a culture of entitlement with zero consideration about who exactly will send this money.

  3. Mike Smith

    @David: Well, it would need to be someone that *has* money, and hasn’t been previously burned by their past defaults. Does that leave anyone?

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