Does Pier Luigi Bersani believe in miracles?


UPDATE, March 26, 8 a.m. ET: So with a day left to form a government, Bersani is set to meet Berlusconi’s allies today.  Governments of miracles do, in fact, sometimes happen for those who want to be prime minister enough. 

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The latest on the attempts by centrosinistra (center-left) leader Pier Luigi Bersani to form a government:Italy Flag Icon

Bersani expressed the urgency of Italy’s dilemma.

“The situation is dramatic. We need a government. In fact we need a government capable of performing miracles,” he told reporters at parliament where he was meeting union leaders, seeking support for modest economic reforms.

And so the coalition courtship continues, even as the eurozone goes through another wrenching crisis over a country with 0.2% of the eurozone GDP that controls about half of its internationally recognized territory.

Bersani blew off yet another attempt by centrodestra (center-right) leader Silvio Berlusconi to form a ‘grand coalition’ with Bersani as premier and former justice minister Angelino Alfano as vice premier in exchange for choosing a candidate for president amenable to Berlusconi’s allies when current president Giorgio Napolitano’s term ends in May.  Despite predictions of oblivion, Berlusconi came within 0.4% of beating Bersani’s coalition in elections last month, so of course it’s in the once-again ascendant Berlusconi’s interest to demand either entering government or new elections, which polls show Berlusconi would now win.

Silvio, you sexy thing.

Napolitano gave Bersani a mandate to form a coalition government on Friday (here’s my bleak take on some of Italy’s options over the weekend).  Beppe Grillo, the leader of the Movimento 5 Stelle (the Five Star Movement), has ruled out even an informal alliance to prop up a Bersani-led government — Bersani and the center-left have a majority in the lower house of the Italian parliament, but not in the upper house.

Did Bersani watch the same near-disaster in Nicosia and Brussels that I did over the weekend?

All he’s got in his arsenal is to talk about a government of miracles?

If that’s really all Bersani has in his quiver at this point, it’s not surprising that Italians believe he doesn’t deserve to be prime minister.  What a mess.

Something tells me that Florence mayor Matteo Renzi will be replacing Bersani as the leader of the Partito Democratico (PD, Democratic Party) — in hours or days, not weeks.

Mikati’s resignation need not set off immediate alarms about Lebanon’s future


In Lebanon, elections are both much less and much more than what we typically think of as elections. Lebanon

Given that the country’s constitution mandates that the prime minister is always a Sunni Muslim, the president a Maronite Christian and the speaker of the national assembly a Shi’a Muslim, it’s not a surprise that parliamentary elections are a carefully stage-managed process of allocating seats to Lebanon’s national assembly (مجلس النواب) to ensure half of the seats (64) go to Muslims and another half (64) go to Christians — specific allocations guarantee a set number of seats for each of Lebanon’s 22 confessionals.

So the resignation of Lebanon’s prime minister Najib Mikati (pictured above) on Friday should be seen as a prologue to the electoral choreography, given that new elections are due in June when the current parliamentary terms ends.  Lebanon’s president Michel Suleiman has accepted Mikati’s resignation, but asked Mikati to stay on as a caretaker prime minister until a new prime minister can be announced.

It should not necessarily be seen as a warning sign that Lebanon is invariably descending into chaos or that it is doomed to be drawn into Syria’s civil war, notwithstanding the latest clashes in Tripoli, which seem to have quieted since the weekend.

Tripoli, Lebanon’s second-largest city on its northern coast near the Syrian border, is especially geared toward tension, with its own Sunni majority and Alawite minority mirroring the demographic dynamic in Syria.  But despite some high-profile kidnappings in the Bekaa Valley last August, and flare-ups from time to time in Tripoli, Lebanon has done a reasonable job in avoiding the same fate as Syria.

That’s in no small part due to the resolve of many (though not all) of Lebanon’s political elite to keep Lebanon from returning to the era of civil war that devastated the country in the late 1970s and 1980s, though as the Syrian civil war approaches its two-year anniversary, it’s becoming increasingly difficult for Lebanese leaders to remain neutral in the conflict.  That became especially true after a car bomb blast in Beirut last October killed Lebanon’s top intelligence official, Wissam al-Hassan, a longtime Hariri ally — his assassination is widely believed to have been engineered by Syrian — or even Hezbollah (حزب الله‎) — forces.  Hezbollah is also widely believed of actively supporting Bashar al-Assad’s regime with military force inside Syria, because Assad (together with Iran’s regime) are the two major lines of political and monetary support for Hezbollah.  If Assad falls in Syria, Hezbollah will no longer be able to look to Damascus for patronage.

So while Mikati’s resignation need not mean an irreparable retreat for Lebanon, it nonetheless portends a difficult few months ahead — the key stumbling block is agreeing to an election law in advance of elections or, at minimum, the agreement for an electoral supervision body to oversee the planned June 9 poll.  Another solution might include the extension of a national unity government with a minor delay of the elections.

The next step lies with Suleiman, who could call a ‘national dialogue’ among all of Lebanon’s political leaders in hopes of achieving at least a caretaker government to see through the implementation of a law that will clear the path for new elections.   Continue reading Mikati’s resignation need not set off immediate alarms about Lebanon’s future

Cypriot-‘troika’ deal means that Cyprus is leaving eurozone in all but name


Another late Sunday night in Brussels, another eurozone bailout plan for Cyprus — and it seems likely that the new deal between Cyprus president Nicos Anastasiades, and the ‘troika’ of the European Commission, the European Central Bank and the International Monetary Fund will endure much longer than last week’s disastrous plan, though capital controls to be implemented by the Republic of Cyprus’s government seem likely to lead to a backdoor eurozone exit for the nation of 1.15 million people.

The Cypriot-troika deal in brief

The deal will shield depositors with under €100,000 in savings from a ‘haircut’ levy, but depositors with funds over €100,000 now face an even more painful result –what amounts to a haircut for depositors and creditors alike at the troubled Bank of Cyprus (the largest Cypriot bank), and an even deeper haircut for Laiki’s depositors and creditors, who will take huge losses as Laiki is wound down.  Laiki (also known as the Cyprus Popular Bank, the country’s second-largest bank) will be split into a ‘bad bank’ and a ‘good bank,’ the latter to be folded into the Bank of Cyprus.

All creditors at the Bank of Cyprus will see their interests restructured into a long-term equity interest and uninsured depositors will take an expected haircut of around 35% or 40%, with their deposits also held up for some time to come.

All the same, as Joseph Cotterill at FT Alphaville writes, the deal is better on two counts:

But there were two major injustices in the first Cyprus-Troika deal which made a mockery of the bail-in principle. Without debate, and upfront, it “taxed” depositors below the insured €100k limit alongside the uninsured. Then the tax was applied to either irrespective of bank. Why should small depositors in Barclays Nicosia or VTB Limassol take pain off large ones in Laiki or BoC, for instance. Well, finally, now we know. They shouldn’t have. The two unjust parts are gone.

Bonus points, I guess (if you’re a eurocrat), for structuring the deal in such a way that it can be implemented directly under Cyprus’s banking authority, so no need for another vote from the Cypriot parliament, which overwhelmingly rejected last week’s plan.  That plan featured a 6.75% levy on all depositors with savings under €100,000 in any Cypriot bank.  The parliamentary run-around, however, will only fuel the ‘democratic deficit’ hand-wringers throughout the European Union and breed resentment inside Cyprus and beyond.

The worst of the Irish and Icelandic precedents

Though the deal is ostensibly narrowed to focus on Cyprus’s two largest banks, and it’s better than last week’s plan, the deal essentially features the worst elements of the Irish and Icelandic examples.

Like Iceland, some of the Cypriot banking sector will be allowed to fail — Laiki’s uninsured depositors are out of luck, no matter whether they are Russian or Cypriot or whatever.  That’s exactly how Iceland approached its banking sector failure.

But unlike Iceland, Cyprus does not control its own monetary policy, so it won’t be able to devalue its currency and take the kind of independent monetary policy steps to rebalance its economy in the way that Iceland has.  Though Iceland is no longer the financial center it was before 2008, it has returned to GDP growth (around 3% in 2011 and 2.5% in 2012) and features relatively low unemployment — just 5.3% as of November 2012.  In contrast, Cyprus remains trapped in the ECB monetary policy straitjacket.

But like Ireland, the rest of the Cypriot banking sector will be essentially nationalized by the Cypriot government, with a European bailout that is likely to require additional bailout assistance and will come with increasingly stringent austerity measures that Cyprus’s government will be forced to take that will invariably depress its own GDP growth.  No one’s optimistic about Cyprus — it seems fated to suffer a fierce GDP contraction and a massive uptick in unemployment, joining Greece and Spain as one of the eurozone’s most troubled economies, no thanks to the Eurogroup’s clumsy policymaking.

Self-inflicted wounds to the European project

It’s worth repeating that the damage from the first Cyprus plan remains and cannot easily be reversed — Cyprus’s banking sector has now been decimated, probably permanently.  As one unsentimental Moscow economist put it, Cyprus’s beaches-and-banks economy is now just beaches.  The best hope for Cyprus’s economy is the rapid development of natural gas deposits that could bost its economy back after what will likely be a double-digit recession. But the ultimate scope and richness of those deposits are still unknown, and there’s no assurance that natural gas will be the country’s economic savior.

Brussels has so thoroughly undermined Anastasiades that he allegedly threatened to resign Sunday at one point, so it’s not clear how much legitimacy he’ll have in the next four years and 49 weeks of his five-year term, especially given that his own center-right party Democratic Rally (DISY, Δημοκρατικός Συναγερμός or Dimokratikós Sinayermós) controls just 20 of the 56 seats in the Cypriot House of Representatives (Βουλή των Αντιπροσώπων).


In addition to the obvious ammunition that eurozone leaders have handed to euroskeptics, no one in Spain or Italy or Slovakia or Latvia should be feeling very good these days about keeping their money in national banks, deposit insurance or not.  Already today, Jeroen Dijsselbloem, the newly elected president of the Eurogroup of eurozone finance ministers (pictured above with IMF managing director Christine Lagarde), has released a statement walking back earlier comments that appeared to hail the Cypriot bailout as a precedent for future deals.

It’s been a horrible start for Dijsselbloem, who succeeded Luxembourg prime minister Jean-Claude Juncker — Juncker has already (very gingerly) criticized the Eurogroup’s post-Juncker approach to Cyprus, and it’s hard to believe that Juncker would have made some of the more glaring errors that  Dijsselbloem has made — unlike Juncker, who was Luxembourg’s finance minister from 1989 to 2009 and has been prime minister since 1995, Dijsselbloem has served as the Dutch finance minister for barely over four months. It’s starting to look like the decision to appoint Dijsselbloem as a sort of compromise Eurogroup president (he’s a pro-growth member of the Dutch Labor Party who’s implementing an austerity regime in an otherwise budget-cutting government led by center-right prime minister Mark Rutte) may have been a poor one.

Capital controls are a backdoor Cypriot eurozone exit 

While it’s far from an original observation — more sophisticated financial commentators and economists have made the same point — the biggest takeaway from the weekend is that Cyprus has essentially been booted out of the eurozone, in large part due to the capitol controls that Cyprus looks set to enact tomorrow when banks in the country reopen — here’s a short summary of the menu of options from Yiannis Mouzakis, based on the capital control bill that Cyprus’s parliament passed over the weekend.  There’s optimism that the controls will be ‘very temporary,’ and will be somewhat lighter than originally feared, but it’s worth noting that Iceland’s controls are still in place even today, over four years after their imposition in late 2008.

The inescapable conclusion is that a ‘Cypriot euro’ is no longer the same thing as a euro throughout the rest of the eurozone.

As former banker Frances Coppola wrote over the weekend, the imposition of capital controls transforms Cyprus into something far short of an equal member of the eurozone:

Once full capital controls are imposed, a Euro in Cyprus will no longer be the same as a Euro anywhere else in the Euro area. It cannot leave the island. The Cyprus Euro will in effect be a new domestic currency. The imposition of capital controls in Cyprus is therefore the end of the single currency in its present form.  Continue reading Cypriot-‘troika’ deal means that Cyprus is leaving eurozone in all but name

A bad day for Boris — London’s mayor called ‘nasty piece of work’ in interview

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Boris Johnson, reelected last year as London’s major and often discussed as a potential Tory successor to prime minister David Cameron, had a very bad weekend.United Kingdom Flag Icon

In an interview with the BBC’s Eddie Mair, Johnson hemmed and hawed over whether he once invented a quote 30 years ago as a young news reporter, lied to former Conservative leader Michael Howard over an affair and a controversial phone conversation from 1990 between Johnson and a friend who wanted to, perhaps, assault a journalist (the journalist was never assaulted, though), each of which are revelations to be discussed in an upcoming documentary about Johnson’s life.

The interview culminates with Mair asking, ‘you’re a nasty piece of work, aren’t you?’

Mair finishes the interview challenging Johnson’s integrity even further for refusing to answer whether he wants to be prime minister one day.

I’m not sure that the questions were entirely relevant to Johnson’s role today as a two-term mayor of London, but it was nonetheless painful to watch Johnson dissemble throughout the interview, especially given the easy manner that ‘Boris’ generally has in public, which was clearly on display during the 2012 summer Olympics.

I’ve seen bad interviews before, and this is about as bad as the infamous Roger Mudd interview with the late U.S. senator Ted Kennedy in 1979 when Kennedy couldn’t give a compelling answer as to why he wanted to be president (Kennedy was challenging U.S. president Jimmy Carter at the time for the Democratic Party’s nomination).

The interview doesn’t necessarily end his chances to become prime minister one day, and it may well backfire on Mair, but it will also certainly renew and reinforce existing doubts about the London mayor’s discipline and his image — it’s the downside to the boyish, off-the-cuff charm that has made him such a noteworthy foil to the more dour Cameron and his chancellor of the exchequer, George Osborne.

Watch the choice clips from the interview below the jump:

Continue reading A bad day for Boris — London’s mayor called ‘nasty piece of work’ in interview

First Past the Post: March 25

East and South Asia

Hazar Khan Khoso will be Pakistan’s caretaker prime minister until May 11 elections.

Former Pakistani leader Pervez Musharraf has returned to Pakistan.

With another one of her nominees resigning due to scandal, South Korean president Park Guen-hye will retain current defense minister Kim Kwan-jin.

North America

The shrinking U.S. role in advising policymakers in Iraq.


Venezuela’s government admits that homicides rose 14% in 2012.

Latin America / Caribbean

The Cuban revolution hasn’t been such a great thing for Cuban blacks.

The Vatican won’t intervene in the Falklands/Malvinas dispute.

Sub-Saharan Africa

Rebels capture the capital of the Central African Republic.

Eight Nigerian governors are set to defect from the Peoples Democratic Party.

The significance of Chinese president Xi Jinping’s visit to Tanzania.

Nigeria’s Chinua Achebe has died.


Cyprus and the IMF/European ‘troika’ reach a deal — with a 40% haircut for deposits at the Bank of Cyprus over €100,000.

Felix Salmon already has some must-read comments on the latest Cyprus deal.

The previously planned capital controls would have essentially meant the end of Cyprus’s membership in the eurozone.

Police say there’s no evidence that Boris Berezovsky, a Russian oligarch living in exile in London, was murdered.

Paris hosts a widespread rally opposed to same-sex marriage.

Middle East and North Africa

Lebanese prime minister Najib Mikati has resigned, three months ahead of parliamentary elections.

Australia and Oceania

Australian prime minister Julia Gillard announces her post-spill team of ministers.