Impressions from Rome (May 2018)
28 years ago I spent my best university semester in the eternal city, thanks to the EU’s Erasmus exchange programme, nominally studying at LUISS university with my Romanian-German LSE/UWC friend Axel K. and my Neapolitan UWC friends and brothers Eugenio and Gianpaolo R., but spending most of our time roaming the city, trying to dance in the discotheques, eating midnight ice-cream at eternal ice cream parlour Giolitti next to the Prime Minister’s seat at Palazzo Chigi, learning to drive in the chaos that was Rome, listening to Paolo Conte and Zucchero, and enjoying every minute of it.
7 years ago I took my two eldest, Sophie and Natalia, to try to show them the fascinations of this beautiful, charming, stooped-in-history-and-culture, chaotic, lively, kind-of-unlivable-yet-forever-lovable city. Ever since I have wanted to come back with my two younger daughters, Sara and Lea, to repeat that trip – and have finally managed, even though they are now nearly old enough to come here on their own with their boyfriends-to-be.
When I came here for the very first time, 35 years ago with my Mexican UWC friend Sigrid A. by autostop from Duino/Trieste, staying with the family of our Roman UWC friend Alessandra C. a stone throw from the Vatican, Italy was still a country full of confidence, of growth, of dynamic family-run SMEs, a country that was to joyfully announce the ‘sorpasso’ in 1987, when the addition of its very sizeable grey economy into the official GDP figures implied that it had surpassed the UK in terms of GDP, making it the 6th largest economy in the world at that time. A country that was brimming with confidence and where the brain drain that has happened over the last 20-25 years was as yet unthinkable.
Back in Rome, now governed by a female mayor heralding from the leftist anti-establishment protest movement ‘Cinque Stelle’ or five stars, founded by a comic -- which has however won 32% of the popular vote in the last general elections in March 2018 (with no government formed yet) -- the city has not lost any of its beauty, splendor, vivacity, and passion, immediately engulfing us three visitors with its charm and aesthetics at every corner, historical, architectural, cultural, and through its nonchalant, ever-cool inhabitants (despite the hordes of tourists and the imperfections of public services).
Nothing is more rewarding than to roam the cradles of our European civilization, trying to grasp how the rule of law of the Roman republic (res publica) that is still the foundation for most legal systems in Europe today, the foundations for markets and governance, the discipline and leadership that made the Roman armies near-invincible for the better part of 500 years of the Roman empire, the introduction of modern water supply aqueducts and sewage systems (cloaca maxima), of architectural feats and seafaring skills, turned this small town on the Tiber into one of the longest-lasting empires, straddling all of the Mediterranean, from Spain through North Africa (Cartage having been defeated in three Punic wars from 264-202BC despite Hannibal’s elephants crossing the Alpes and terrorizing Italy), Egypt (conquered by Cezar’s adopted son, Octavian, in 31BC, and who crowned himself emperor as Augustus and ruled for nearly 40 years, achieving the feat of combining the status of authoritarian ruler as emperor with grudging acceptance from the all-powerful Senate – whose members had slain his father Cezar in 44BC despite the latter’s military and governmental feats (‘Et tu, Brute?’)), Judea (modern-day Israel) (conquered in 70AD, the winnings from which campaign laid the foundation for the building of the Colosseum, inaugurated in 80AD), modern-day Turkey, modern-day Greece, Macedonia and the northern Balkans, and finally France (conquered over ten years by Cezar in 58-50BC as retold in his ‘De Bello Gallico’, obligatory reading for Latin students in my time, and laying the foundation for his claim to power, cemented by the fateful crossing of the Rubicon – ‘alea jacta sunt’ – the dice have been thrown, no way back now).
If one looks at Italy from a contemporary economic perspective, the long inept rule of Berlusconi, coupled with the temptations that the euro and low interest rates afforded, and the crises in its domestic banking sector that has deprived large parts of the real economy of credit, have resulted in two ‘lost decades’ of stagnating real incomes. Italy is one of the few countries in Europe that to this day have not recovered the GDP of the pre-crisis year 2007. Reading the local papers, one gets that perspective of ‘gloom and doom’, which may well be overdone now that the economy is enjoying a reasonable rebound by its admittedly low standards. La Repubblica, one of its leading dailies, spent a couple of pages on the economic rivalry between Italy and Spain (‘il derby infinito’), pointing out that while Italy was way ahead in the 1990s, since then Spain has been winning the next rounds, citing motorways, energy, telecoms, symbolically compounded in soccer (where Spain sealed Italy’s lack of qualifying for the upcoming World Cup for the first time in half a century), and finally the ignominy of Valentino Rossi regularly losing to Spanish ace Marc Marquez in GP motorcycle racing; the most recent symbol being the ‘sorpasso’ in GDP per capital of Italy by Spain in 2018 as the ultimate signal of relative decline (see photos). It is a stark sign of the lack of confidence and the incipient complexes that two decades of underperformance and rudderless politics have inflicted on this resourceful and crisis-tested country.
As to modern Italia’s sociopolitical situation, it is also a long way away from the optimism of the 1987 ‘sorpasso’ and the dominance of the Roman empire of two millenia ago. There is a saying that you cannot pick your parents. The same does not usually hold true of your ruling politicians, which can be voted out of office. The relevant saying there is ‘you get whom you deserve’, which I think would be grossly unfair if applied to contemporary Italy. But again, reading the local press, two months after the inconclusive national elections results, leaves one dumbfounded.
Italy’s political class, which produced nearly one Prime Ministers for every calendar year after the re-founding of the Republic after WW2 (without that materially affecting the strong economic growth of the 50s/60s/70s when the country powered ahead), offers a picture that leaves foreign observers scratching their head. The elections were won by two populist blocs, on the left the 5 Stelle movement of comedian Grillo, now run by a well-dressed and telegenic southern Italian politician without much experience, Di Maio, coming first with 32% of the popular vote. On the right, there is the unsavory coalition of the racist and separatist Lega Nord headed by Salvini, again without much experience to speak of, taking together with octogenarian Berlusconi just shy of 30%, leaving established parties like the Social Democrats of Matteo Renzo in low teens – clear evidence of the disgust of the population with the performance of the established parties. But how a Berlusconi would still be electable, when he has collected so many scandals and court judgments on both ethical and misogynist grounds in the last ten years that it makes Donald Trump (nearly) look like a decent bloke, is beyond many observers; allegedly Salvini let a potential coalition with Di Maio fail over the latter’s refusal to include Berlusconi in the coalition.
The papers further report on the theatre tour of the founder of that 5 Stelle movement, depicting him sitting in a bed on stage and decrying the ‘death by boredom’ of the centre-left PD of Renzi, the former mayor of Florence who once had Macronesque attributes and hopes attached to himself, but who overestimated his pull and sway. That same Renzi, even though his party lost strongly in the polls, still evidently has the overblown ego that has obstructed his view of realities and feasibilities for some time, and who has recently ruled out any coalition with the winning 5 Stelle movement, to the dismay of his party – much like Martin Schulz did for the SPD in Germany in October 2017, only to do a U-turn that has resulted in an uneasy grand coalition and his exiting of the domestic political stage of Germany.
Meanwhile, all eyes in Europe are directed at Italy, whose public debt/gdp ratio stands at a perilous 124%. Italy’s total indebtedness amounts to some EUR 2130 billion, a figure that is >5x Greece’s outstanding public debt where a long overdue debt forgiveness is slowly being agreed between the mostly public lenders – a similar exercise for Italy would be prohibitive given the numbers involved, and would pose a huge problem for the economic stability of Europe. The back-of-the-envelope rule to calculate the sustainability of a country’s foreign debt is encapsulated in the following simple formula:
A simple formula tells us this. It says the primary budget balance compatible with a stable debt-GDP ratio is equal to:
d* [(r-g)/(1+g)]
where d is the debt-GDP ratio, r is the long-term real interest rate and g the long-term real growth rate.
Where r is the real interest rate, and g is the growth of GDP (and whence tax revenues). As long as g>r, i.e. as long as tax revenues grow faster than interest payments, the situation is said to be sustainable. Italy has had near-zero growth in the last decade, but real interest rates have also been very low given quantitative easing by the European Central Bank in recent years. As European monetary policy is expected to less accommodating from next year, as already seen in the US, where interest rates have risen strongly this year, the equation is likely to turn negative on Italy, accelerating the growth of its debt/GDP ratio beyond the current 124%. One of my friends has the unenviable job of explaining to the IMF and others that this won’t be a problem …
But somehow Italy and its cheerful and resourceful people always find a way forward. We keep our fingers crossed, and are grateful for the chance to see all the wonders of history and culture amassed in this wonderful eternal city.
Last but not least, in which town can you find such excellent and divergent buskers (Pachebel, Bach?, and Pink Floyd) on such beautiful street corners, set against the Pantheon, the Piazza Colonna, and the Campo dei Fiori? Only in Rome!!
