Posts tagged "Italy"

The euro: thunder and lightning | Editorial

Continent-wide spending cuts are not about to be overturned in favour of a raft of policies designed to encourage growth – sadly

Thanks must go to the gods of metaphor, for it was presumably they who sent the lightning that forced François Hollande’s plane to turn back mid-journey to Berlin on Tuesday afternoon. This being rain-sodden reality rather than heightened drama, the French president had better luck on a second flight to meet chancellor Angela Merkel – but even so, you couldn’t have asked for a more perfect omen. Because there are those who view any mission to save the euro as cursed. Plenty more see policymaking in the crisis-hit eurozone as a lot of Sturm with a hefty dollop of Drang. And then there are the more excitable European politicians who would describe the fate of the single currency as hanging on a war of ideas: between left and right, between austerity and growth, and between the newly elected, idealistic Mr Hollande and battle-hardened German pragmatist Mrs Merkel. Stormy indeed.

If only things were so stark. Certainly, a shift of emphasis and policy is discernible, both in terms of the people making decisions and the economic and political backdrop they are now working against. But the continent-wide spending cuts are not about to be overturned in favour of a raft of policies designed to encourage growth – sadly. Nor, unfortunately, are stricken southern members of the euro about to receive the relief they need from the wrong-headed austerity programmes they have been forced to follow with such disastrous economic and social effect.

Plainly, the economic policies followed by eurozone ministers and officials are not working. First, their governments had the option in the summer of 2010 to go for sustained and substantial fiscal stimulus; they didn’t take it. The result was underlined, with the eurozone just avoiding its own double-dip recession – and that too largely because of strong growth for German exports. The domestic economy of the single-currency area remains in dire shape, with Spain and Italy both shrinking and France flatlining. Second, when it comes to warding off financial contagion, the euro club has finally cobbled together a firewall of pledged money, to be called upon if another nation ended up in serious trouble. The trouble is, Spain and Italy are already in financial turmoil – with their banks in desperate need of extra cash and their governments struggling to raise funds from markets – and yet very few analysts or financiers have much faith in the firewall. Finally, for the nations already forced on to financial life support, Brussels (with the IMF) prescribed a combination of drastic cuts, radical changes to welfare systems and labour laws, and a fire sale of public assets. In Greece, the guinea pig for all this, the result has been to seal a national economic depression, coupled with widespread unrest and violence – and to destroy support for the political mainstream. A failure on all counts.

So there is plenty of reason to hope that Mr Hollande has some substance behind his stirring rhetoric about the need for growth. The French president can point to the fall of 10 euro-area administrations since 2008, sky-high unemployment and even to Mrs Merkel’s own poor showing in this weekend’s elections in North Rhine-Westphalia. Yet his policies so far amount to slowing down the pace at which France reduces its (relatively small) budget deficit, and taxing wealth in order to create more jobs. At an international level, he wants to adulterate the pure austerity his predecessor, Nicolas Sarkozy, agreed with Mrs Merkel. But this is merely to slow progress towards the cliff edge, when what is needed is a U-turn. What the continent really needs to go for is an outright fiscal stimulus, of the kind even Mrs Merkel agreed to in 2009 (which gave German carmakers such a shot in the arm). In the crisis zones of Greece, Portugal and Ireland, the eurozone needs to impose a sharp reduction in the value of public debt. Preceding that, the euro club should set up an emergency pool to forcibly recapitalise banks, in return for European public equity stakes. Drastic? Yes. But the euro area’s existential crisis will not be alleviated by rhetoric, however cheering.

Eurozone crisis live: Markets slide as Greek euro exit looms

Chances of Greece leaving the eurozone are growing, as political leaders gather for last-ditch coalition talks in Athens

8.05am: European stock markets have fallen sharply at the start of trading,

In London, the FTSE 100 has shed 70 points, or 1.2%, to 5503. Every share has lost ground, with banking stock and miners leading the fallers.

Trading screens across Europe are flashing red, with the main indices losing between 1.2% and 1.5%.

The growing prospect of a disorderly Greek default is alarming investors, explained Michael Hewson of CMC Markets, who commented:

Markets continue to feel the pressure and the stakes continue to rise as what was declared unthinkable a year ago or so now, starts to permeate mainstream thinking in Europe.

Political developments in Germany were also alarming traders, with Angela Merkel suffering electoral losses in North Rhineland Westphalia (details here). Hewson added:

These defeats could weaken her hand in trying to pass the fiscal compact through parliament at a time when her insistence on fiscal discipline or austerity comes under attack from around Europe.

7.55am: The eurozone crisis will be dominated today by talks in Athens and Brussels, while new industrial production data will show the state of the eurozone economy. Spain and Italy must also test investor confidence with bond sales.

Here’s the agenda:

• Eurogroup finance ministers meet in Brussels: from 12.30pm BST / 1.30pm CEST
• Coalition talks resume in Athens: 5.30pm BST / 7.30pm Athens

• Spain sell €2bn-€3bn of 12 and 18-month bonds: from 9.30am BST
• Italy sells €3.5bn-5.25bn of bonds: from 10am BST
• Germany sells €4bn of 6-month bonds

7.45am: Good morning, and welcome to our rolling coverage of the eurozone debt crisis.

It’s the start of a crucial week. The political crisis in Greece has intensified over the weekend, after attempts to form a unity coalition floundered. Leaders are due to meet again today, but without leftist coalition Syriza — which yesterday refused to join a multi-party government that would stick to Greece’s austerity plans.

If a coalition can’t be formed (as appears likely), Greece heads for new elections in a few weeks.

The talk in the financial markets today is that a Greek exit from the eurozone is now a question of when, rather than if. The prospect of a disorderly default is likely to hit markets again today.

The political vacuum in Greece will dominate the agenda in Brussels later today, where finance ministers from across the eurogroup are meeting.

Italy’s political outsiders have their day in the absence of Berlusconi | Tobias Jones

The success of comedian-turned-activist Beppe Grillo in Italy’s local elections show a craving for political transparency

Although overshadowed by elections in Greece and France, Italy’s local election results, announced late on Monday evening, are nonetheless fascinating. They represent a massive victory for a comedian-turned-blogger-turned-activist called Beppe Grillo. For years, the round-faced, 63-year-old with thick grey hair has been shaking the cage of traditional politics: staging rallies, organising petitions and pleading for a clean-up of the country’s notoriously murky politics. He’s been a bit like an Italian Michael Moore – a passionate self-publicist who sees the world in black and white.

Until now, no one really took the comedian seriously. He was a stone in the shoe and nothing more. But his Cinque Stelle political movement has come from nowhere to win, in recent projections, almost 20% of the vote in the city of Parma almost 15% of the vote in Genova, Grillo’s home city. The centre right, by contrast, stands to win between just 10% and 20% in those cities.

The other extraordinary story of the elections – in which 28 provincial capitals and almost 1,000 town councils have gone to the polls – occurred in Palermo. There, in the Sicilian capital, the centre-left and centre-right coalitions appear set to gain barely more than 30% of the vote between them. It’s as if the Tories and Labour were to get less than one-third of all votes cast. And the clear winner in Palermo is another small party of protest, the Italy of Values party, led by Silvio Berlusconi’s nemesis, Antonio Di Pietro. Like Grillo, Di Pietro – a former magistrate who spearheaded investigations into corruption in the 1990s – has long campaigned for an end to corruption in public life.

Unlike France and Greece, the election results can’t really be read as a reaction against austerity measures. Since Italy currently has a “technocratic” government (a non-political coalition of managerial safe-hands), those dishing out austerity weren’t facing the electorate anyway.

But what it is a reaction against is the continuing farce of corrupt politicians trousering huge sums of money. In recent weeks, the news has been full of allegations (and filmed evidence) of epic embezzlement by politicians in the Northern League, and there have been serious allegations about the probity of mainstream politicians like Francesco Rutelli and Roberto Formigoni. Not for the first time, the Italian electorate appears to be yearning for transparency, and Di Pietro and Grillo appear to be the main beneficiaries.

The centre-left coalition will doubtless declare itself happy about the results: in Genova, after all, their candidate Marco Doria (from the ancient noble family that gave Sampdoria football club half its name) appears to likely to win over 45% of the vote. A similar percentage is likely to be garnered in other, traditionally leftwing cities.

And yet there are circumstances that should temper any optimism amongst the leftwing parties: in many cities, the coalition between the Northern League and Berlusconi’s Freedom Party broke down, meaning rightwing votes were split. That coalition has been the bedrock of all Berlusconi’s victories down the years and, when the prize at stake is national, rather than local, government, they will almost certainly kiss and make up. And even in one city where the rightwing vote was split, Verona, the Northern League candidate seems likely to win well over 55% of the vote.

But the greatest reality check on any exuberance about a bright, new political dawn in Italy is the fact that Berlusconi, the slickest salesman on the peninsula, appears to have sat this one out. A master at picking the right fight, he’s been almost entirely absent from campaigning this time round. It’s almost as if he thought he should show the centre-right what it was missing, let them remember they’re nothing without him. Had he been all channels blazing in this election, the results, there’s no doubt, would have been very different.

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To understand this crisis we can look to the Long Depression too | Donald Sassoon

Economic crashes are part of capitalism’s history. And 50 years before 1929 there was another major global downturn

‘Growth, growth, my kingdom for some growth!” But the kingdom is in double-dip recession and the painful slog out of it may be longer than the government expected. Elsewhere, it’s not fun either. Spain is in serious recession with unemployment at almost 25%. Its borrowing costs are increasing, as are those of Italy – two major markets for British exports. In France, whose economy is faltering, François Hollande is poised to win the presidential election. The “markets” are running scared.

Crises have always been with us. They are part of the history of capitalism. This crisis is not like any of the previous big capitalist crises except in this: “we are not all in it together”. There will be winners and losers and, as usual, the outcome is uncertain.

The crisis of 1929, or the Great Depression, has become the ur-crisis, the proto-crisis, the one crisis all other crises are compared to. Is the present downturn as bad as that of 1929? Recent OECD data is not encouraging, particularly for Europe. The Federal Reserve chairman, Ben Bernanke, is more optimistic, at least for the United States. The meltdown, he explained, would have been even worse than that of 1929 had it not been for decisive government intervention (a modest way of patting himself on the back).

Comparisons are always useful, but the truth is that the crisis of 1929 was quite different from today’s – not surprisingly since the world has changed considerably. It is more globalised, more financialised (in the west), and more industrialised (in what we used to call the third world). In 1929 some looked back to the previous big crisis of capitalism, the so-called Long Depression of 1873-96, in the hope of learning something. Strictly speaking, the Long Depression was not a real one in the sense of stagnant or negative growth. But prices fell – great for consumers but disastrous for businesses. Growth faltered but never turned negative. And the crisis was global. There was a realignment of the world economies (this, after all, is what big crises do); the US replaced Great Britain as the leading industrial power, while Germany caught up.

The fall in prices led to several stock exchange panics (Vienna 1873 and Paris 1882). There was a tariff war between France and Italy. Everyone, bar Britain, adopted protectionism. The US, today’s haven of neoliberal ideology, was already the world’s most protectionist country. Contrary to current mythology, the power of the state increased. US federal spending reached new heights. Imperial powers (France and Britain) expanded their empires. Others (Germany and Italy) tried to join in.

States also became more authoritarian. In the 1870s, Bismarck passed anti-Catholic and anti-socialist legislation. In Italy the governments waged a virtual war against southern “bandits”. But along with the sticks there were some carrots. The working week was shortened, and the basis of the modern regulatory welfare state was created, particularly in rich states such as Germany, Belgium and Britain.

These reforms were spurred by the rise of labour, for in 1889 they were the central plank of the Second International, the organisation of socialist and labour parties. While dreaming to end capitalism, socialists effectively reformed it: universal adult suffrage, equal rights for all including women, legal aid, the eight-hour day, free medical service, and free education. It was during the Long Depression that most socialist parties were created, and by 1918 some were electorally stronger than they are now. Of course, they thought that capitalism would collapse. As the German socialist leader August Bebel wrote to Engels: “Every night I go to sleep with the thought that the last hour of bourgeois society will strike.” Engels had to calm him down.

Bebel had a point though: rising unemployment, increased capitalist concentration, strikes – but no economic collapse. Instead, there was an increased commercial and political rivalry between the great powers and, eventually, a major European war (1914-18) that had, among its consequences, the further consolidation of the American economy, the Bolshevik revolution, and the beginning of the end of Europe as a significant political force in the world.

The crash of 1929 accelerated these trends. By 1936 it appeared to have been resolved, but a year later a second dip threatened. The second world war, the most savage of all times, resolved the situation, thanks to a mega state stimulus. Keynes had said that it would be worth paying people to dig trenches and fill them up again. War does it better: it employs people to produce and use weapons of mass destruction. The outcome eliminated Europe from any leading role in international affairs, establishing the political supremacy of the US and the rise of the USSR as a world power.

Today, of course, the chances of an international war are remote, and everyone is betting on China; but what is most telling is that few had predicted the depression of 1870-96, or the crash of 1929, and fewer still guessed what would be their outcomes – just as few predicted the current crises and no one knows what will happen next. When it comes to forecasting really important events (the rise of Islamic fundamentalism, the end of the USSR, the Arab spring, etc) we are barely ahead of our ancestors, who read the future in the entrails of slaughtered goats.

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Italy’s Ferrari of the railways gets off to a flying start

Pioneer of first privately operated high-speed train in Europe eyes the UK

Could this sleek, red railway equivalent of a Ferrari one day cut a blurry dash through the Chilterns? If Britain has struggled to sell the idea of high-speed rail to a sceptical public, the government might like to turn to Italy for inspiration.

From Saturday, the traveller from Rome to Naples can cover the 225km (140 miles) in little over an hour, paying as little as €20 (£16.33) for the pleasure.

The new Italo – the first privately operated high-speed train in Europe – is a train like no other, claims Luca Cordero di Montezemolo, chairman of Ferrari and boss of NTV, the firm challenging the state service.

He has a point. Sleeker, faster, quieter, lighter, the AGV – automotrice à grande vitesse – brings into passenger service the technology behind the train world speed record of 574.8kmph in April 2007.

British campaigners for high speed rail rolled out music veteran and train enthusiast Pete Waterman in January, but only the Italians could attempt to make a train launch sexy.

Mobbed by press at the inaugural journey from Rome Tiburtina, the flamboyant Montezemolo purred: “I’m addicted to speed. Speed and risk. Economic risk.”

There are no travel “classes”, NTV insists, only different “ambiences” – albeit differentiated by bigger seats, at-seat dining and pricier tickets.

“Remember, you’re in the cheap seats!” cried Montezemolo, to the press in carriage seven (ambience: “Smart”). He stressed that “our prices are super-competitive despite the services we offer”, which include free Wi-Fi, live TV, films in a cinema carriage and comfortable leather seating.

Should his Nuovo Trasporto Viaggiatori (NTV) successfully grab a projected 20% share of the market from state-owned Trenitalia and start making money, Montezemolo told the Guardian he might indeed seek to export his brand of superfast travel to the UK. “If it’s possible to compete in other countries, yes we would.”

Other markets will be in play long before the UK gets its act together. The transport department says no decisions have been taken about either the parameters for procurement of trains or how operators will be sought.

The hybrid bill that will give the parliamentary muscle to make HS2, the proposed high-speed railway from London to Birmingham, a reality is still a potential pitfall, for all the assent that the transport secretary can give.

The manufacturing and engineering group Alstom, which provided Virgin’s Pendolinos for the west coast mainline as well as France’s TGVs and now the state of the art Italo AGV, will doubtless be one of the prime contenders to build the trains that should ply the tracks from London to Birmingham after 2026.

Not only does the AGV hit the top speeds that the tracks allow effortlessly, it does not display anything so vulgar as a locomotive doing the pushing or pulling.

Distributed traction means that where you might expect to find a locomotive is, on the Italo, the cinema car; at the other end, the Prima carriage. This, according to Pierre-Louis Bertina, boss of Alstom’s Italian train operations, is the most visible difference.

The bigger technological advances, Bertina said, are hidden from the layman. The train’s speed is capped on these tracks at 300kph, well within its capabilities. In true Ferrari and Formula One style, Alstom promises rapid “pit stop” maintenance as well as tracking technology to identify problems remotely, fix them quickly and keep the service running – an operation similar to the one it provides in the UK for Virgin.

While the original high speed route in Italy connecting Rome and Florence dates back to 1978, most of the shoots of the wider network have grown over the last seven years, now running from Turin to Venice, crossing the Milan to Salerno line (still under construction in parts).

Asked how high-speed rail changes a country, Montezemolo talked of how he had once spent an hour crossing Rome in the metro. Today, he was doing half the ancient Appian Way down to Naples in the same time.

Andrew Adonis, the transport minister who put HS2 in motion, thought that the economic benefits would be clear: Birmingham could in effect be part of the London economy. Montezemolo concurs: “It’s like a super-metropolitan system for the while country,” he said.

In fact, it makes the journey between Italy’s great classical cities virtually identical timewise to traversing London’s Northern Line. That, Montezemolo might hasten to add, is where the comparison ends.

Gwyn Topham was on a trip paid for by Alstom

Eurozone needs a growth strategy, not more austerity | Nouriel Roubini

The credit crunch in the eurozone periphery is intensifying but there are signs of austerity and reform fatigue both in Spain and Italy

Since last November, the European Central Bank, under its new president, Mario Draghi, has reduced its policy rates and undertaken two injections of more than €1tn (£825bn) of liquidity into the eurozone banking system. This led to a temporary reduction in the financial strains confronting the debt endangered countries on the eurozone’s periphery (Greece, Spain, Portugal, Italy, and Ireland), sharply lowered the risk of a liquidity run in the eurozone banking system, and cut financing costs for Italy and Spain from their unsustainable levels of last fall.

At the same time, a technical default by Greece was avoided, and the country implemented a successful – if coercive – restructuring of its public debt. A new fiscal compact – and new governments in Greece, Italy, and Spain – spurred hope of credible commitment to austerity and structural reform. And the decision to combine the eurozone’s new bailout fund (the European Stability Mechanism) with the old one (the European Financial Stability Facility) significantly increased the size of the eurozone’s firewall.

But the ensuing honeymoon with the markets turned out to be brief. Interest-rate spreads for Italy and Spain are widening again, while borrowing costs for Portugal and Greece remained high all along. And, inevitably, the recession on the eurozone’s periphery is deepening and moving to the core, namely France and Germany. Indeed, the recession will worsen throughout this year, for many reasons.

First, front-loaded fiscal austerity – however necessary – is accelerating the contraction, as higher taxes and lower government spending and transfer payments reduce disposable income and aggregate demand. Moreover, as the recession deepens, resulting in even wider fiscal deficits, another round of austerity will be needed. And now, thanks to the fiscal compact, even the eurozone’s core will be forced into front-loaded recessionary austerity.

Moreover, while über-competitive Germany can withstand a euro at – or even stronger than – $1.30, for the eurozone’s periphery, where unit labor costs rose 30-40% during the last decade, the value of the exchange rate would have to fall to parity with the US dollar to restore competitiveness and external balance. After all, with painful deleveraging – spending less and saving more to reduce debts – depressing domestic private and public demand, the only hope of restoring growth is an improvement in the trade balance, which requires a much weaker euro.

Meanwhile, the credit crunch in the eurozone periphery is intensifying: thanks to the ECB long-term cheap loans, banks there don’t have a liquidity problem now, but they do have a massive capital shortage. Faced with the difficulty of meeting their 9% capital-ratio requirement, they will achieve the target by selling assets and contracting credit – not exactly an ideal scenario for economic recovery.

To make matters worse, the eurozone depends on oil imports even more than the United States does, and oil prices are rising, even as the political and policy environment is deteriorating. France may elect a president who opposes the fiscal compact and whose policies may scare the bond markets. Elections in Greece – where the recession is turning into a depression – may give 40-50% of the popular vote to parties that favor immediate default and exit from the eurozone. Irish voters may reject the fiscal compact in a referendum. And there are signs of austerity and reform fatigue both in Spain and Italy, where demonstrations, strikes, and popular resentment against painful austerity are mounting.

Even structural reforms that will eventually increase productivity growth can be recessionary in the short run. Increasing labour market flexibility by reducing the costs of shedding workers will lead – in the short run – to more layoffs in the public and private sector, exacerbating the fall in incomes and demand.

Finally, after a good start, the ECB has now placed on hold the additional monetary stimulus that the eurozone needs. Indeed, ECB officials are starting to worry aloud about the rise in inflation due to the oil shock.

The trouble is that the eurozone has an austerity strategy but no growth strategy. And, without that, all it has is a recession strategy that makes austerity and reform self-defeating, because, if output continues to contract, deficit and debt ratios will continue to rise to unsustainable levels. Moreover, the social and political backlash eventually will become overwhelming.

That is why interest-rate spreads in the eurozone periphery are widening again now. The peripheral countries suffer from severe stock and flow imbalances. The stock imbalances include large and rising public and private debt as a share of GDP. The flow imbalances include a deepening recession, massive loss of external competitiveness, and the large external deficits that markets are now unwilling to finance.

Without a much easier monetary policy and a less front-loaded mode of fiscal austerity, the euro will not weaken, external competitiveness will not be restored, and the recession will deepen. And, without resumption of growth – not years down the line, but in 2012 – the stock and flow imbalances will become even more unsustainable. More eurozone countries will be forced to restructure their debts, and eventually some will decide to exit the monetary union.

Copyright: Project Syndicate, 2012.

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No end to hiring freeze in finance sector, Michael Page warns

Recruitment firm’s profits from banking jobs plunge as it describes sector as ‘particularly depressed’

Recruitment firm Michael Page International has warned that the UK banking sector remains “particularly depressed” and sees no end to the hiring freeze at many financial firms.

Profits from UK banking recruitment plunged 50% year-on-year between January and March, dragging the firm’s overall UK profits down 3.7% to £30.6m.

Chief executive Steve Ingham said: “Clearly there are still issues around the euro zone sovereign debt and these things are influencing our business, but … I don’t think things are getting worse. Our conclusion on March was that banking remains difficult [and] certain geographies remain more challenging than others.”

He pointed to Italy, Spain and Britain. European stock markets were rocked by a wave of panic selling on Tuesday amid fresh fears over Spain and Italy, which saw borrowing costs jump.

Michael Page, which is seen as a bellwether for the wider economy, described the UK market as “very challenging and highly competitive” but said this was offset by stronger performances in other countries, including Germany and France, which grew by 36% and 10% respectively. Group profits climbed 6.9% to £136m in the first quarter.

Shares in the company dived 6% in the morning following a recent strong run for the FTSE 250 index stock, and finished the day 3.6% lower at 437.8p.

In Asia, where the firm employs more than 1,000 people, profits climbed 23% to £26.3m. However, like UK and North America, the weakness in banking reduced growth rates, particularly in Tokyo, Hong Kong and Singapore. Amid the turbulence in financial markets over recent months, profits from banking recruitment worldwide dropped 12% and the sector now accounts for 8% of the firm’s trading (UK banking makes up 1%). Recruitment in engineering, construction, property, supply chain and business procurement, accounts for nearly a fifth of its business.

Investec Securities analyst Robert Morton switched his recommendation on the stock to ‘hold’ from ‘buy,’ saying: “The recruitment sector will clearly face some choppy waters in the very short term, but we still believe that the underlying structural recovery/growth story for the sector remains intact.”

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Letter: Antonio Tabucchi was keen to expose the crookedness of politicians, particularly in Italy and Portugal

Philip Cooke’s obituary of Antonio Tabucchi (4 April) rightly draws attention to Tabucchi’s determination to remind us that “fascism is a great historical wound which is not yet healed”. Tabucchi was equally determined to expose the crookedness of politicians from all sides of what he saw as the shoddiness of politics in Europe today, notably in Italy and Portugal. “Democracy,” he said, “isn’t a state of perfection. It has to be improved, and that means constant vigilance.” As he knew better than most, silence is not vigilance.

Machiavelli’s The Prince, part three: the personal in the political | Nick Spencer

If the author’s diplomatic career saturates The Prince, so does his desperation for redemption after his fall from grace

The Prince was a book of its time both politically (as we saw in week one) and intellectually (last week). But it was also a personal book, and we miss something of its power if we ignore its biographical context.

Machiavelli’s family was neither wealthy nor well-connected. His father, Bernardo, was a lawyer and humanist who diligently grounded his son in the studia humanitatis but was unable to arrange for him a life of aristocratic luxury or even a cushy government stipend.

Instead, although Machiavelli’s early years are poorly documented, it seems certain that it was a combination of humanist education, hard work and intelligence that earned him a major appointment in 1498. Machiavelli was as close to being a self-made man any anyone in Renaissance Florence.

As secretary of the Ten of War, Florence’s foreign affairs and war committee, he was the city’s highest-ranking diplomat for 14 years, leading embassies to and spending months in the courts of the French king, the pope, the holy Roman emperor, and others. The Prince was written by a man who, as he informs Lorenzo de’ Medici in the dedication, had “knowledge [that was] gained through long experience of contemporary affairs”. When it came to geopolitics, Machiavelli knew whereof he spoke.

The author’s diplomatic career saturates The Prince. Alongside the Greek and Roman models so favoured by humanists, the book is populated with contemporary examples and lessons, many of them transposed, almost verbatim, from Machiavelli’s personal correspondence and legations. Thus his breathless praise for Cesare Borgia’s ruthlessness, his admiration of Pope Julius II’s boldness, and his criticism of the Emperor Maximilian‘s ineptitude passed largely unaltered from diplomatic communiques into The Prince.

Even when his diplomatic memos are not quite so obvious, Machiavelli’s experience remains in view. His time at the French court taught him that the Florentine view of their city’s power and importance was utterly naive and inflated. If the republic wished to survive it needed to recognise how the real world worked. The Prince offered some candid and blunt advice along these lines, explicitly drawn from a career at the ambassadorial coalface. The author was, in effect, leaking the diplomatic cables in order to help “save [Italy] from the cruelty and barbarity of [the] foreigners” encroaching upon it.

The Prince is even more personal than this, however. In 1512, the Medicis, with papal encouragement and Spanish help, defeated the Florentines and dismantled the republic. Machiavelli found himself out of favour and out of work. Worse, he was under suspicion for plotting against the new ruling clan and was subsequently tortured by strappado, in which the body was hoisted to the ceiling by wrists bound behind the back and then dropped to the floor, thereby usually tearing the arms out of their sockets.

Machiavelli survived, maintained his innocence and was released. But the experience marked him. “Fear means fear of punishment, and that’s something people never forget,” he wrote in the chapter 17, on cruelty and compassion.

The Prince was Machiavelli’s attempt to worm his way back into favour following this disaster, and is marked not only by examples drawn from his diplomatic career but by a heartfelt plea for preferment. This entailed the mandatory obsequiousness that came with such “mirror for princes” books: “your illustrious house … favoured by God and church … [is] well placed to lead Italy to redemption,” he writes towards the end of the book.

More strikingly, however, it also involved a personal entreaty that sounded clear and early in the book. The dedication explains how The Prince’s wisdom derived from what the author had “discovered and assimilated over many years of danger and discomfort”. The book was written because the author was “eager myself to bring Your Highness some token of my loyalty”. And it was hoped, the dedication concluded, that “this small gift” would encourage “Your Highness” to “look down on those far below” and to see “how very ungenerously and unfairly life continues to treat me”. If there is a dark and a desperate tone to The Prince, it is because the author’s life had, of late, taken a dark and a desperate turn.

The sensitive diplomatic material and the personal nature of The Prince helps explain why, although written in 1513, the book was not published until after Machiavelli’s death, over 15 years later. For all its subsequent fame, it had little immediate impact, at least not in the way Machiavelli had desired. The Prince failed in its mission and Machiavelli lived the rest of his life in political obscurity.

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Eurozone crisis live: Recession fears intensify as unemployment hits record high and manufacturing suffers

• Jobless rate hits 10.8% across euro countries
• Eurozone probably in recession after “Miserable March”…
• …but UK manufacturers performs well
• Spanish manufacturing slides again; France stumbles
• Weekend protests in Italy
• Today’s agenda

1.29pm: We mentioned earlier that today’s unemployment numbers did not include new data in Greece. Well, Helena Smith says the Athens-based Foundation for Economic and Industrial Research (IOBE) has just released its quarterly report.

In the spirit of keeping readers abreast Helena writes:

Greece’s most prestigious economic research centre predicts that while unemployment in 2012 will continue to climb above 20%, the increases will not be as aggressively as in 2011, when Greece recorded the biggest leap in joblessness of any EU member state.

The country’s Gross Domestic Product will shrink for a fifth consecutive year, with the economy expected to contract by 5% – higher than 4-4.5% estimated by government officials. As a result of diminishing state revenues, IOBE said the budget balance would have to be re-evaluated.

But presenting the quarterly findings, IOBE head Yiannis Stournaras said he remained “optimistic” that Greece could exit the crisis although much he said would depend on political developments not undermining the reform process.

If Athens applied the structural reforms and cuts being demanded by its foreign lenders, the EU and IMF, Stournaras estimated that the country’s public debt to GDP ratio could fall beneath 100% by 2020.

“For this to happen Greece needs to be governed. Holding repeated elections [in the event of weak coalition governments collapsing] will not be good,” he said.

But Helena has found one piece of encouraging news for Greece today – the country’s new finance minister Filippos Sachinidis is apparently predicting that Athens’ 2011 deficit will come in at 9.2% – down from the 10% that finance ministry officials feared it would reach.

12.59pm: Stock markets in Europe’s weaker economies have fallen today, but it’s all rather calmer in the major indices.

Spain’s IBEX is currently down 1.4%, following the news that its manufacturing sector suffered a particularly weak March. In Portugal, the PSI 20 has lost almost 1% while Italy’s FTSE MIB is the worst performer, down 1.7%.

The FTSE 100 and the German DAX, though, are effectively flat.

City traders say that the poor eurozone manufacturing data was balanced out by better-than-expected data from China. Joshua Raymond of City Index explained:

Investors have clung on to the fact that we have not seen Chinese data disappoint further, despite expectations now that the Chinese economy could see its worst quarterly performance for three years.

12.41pm: European unemployment levels will continue hit further record highs this year, economists fear, following the news this morning that the jobless rate hit 10.8% in February:

As Raphael Brun-Aguerre, an economist at JP Morgan in London explained (via Reuters):

You have public sector job cuts, income going down, weak consumption. The economic growth outlook is negative and is going to worsen unemployment.

Jennifer McKeown, senior European economist at Capital Economics, also predicted that the eurozone unemployment crisis will get worse, which will further intensify the pressure on the region’s economy:

Soaring unemployment is clearly adding to the pressure on household incomes from aggressive fiscal tightening in the region’s periphery.

12.05pm: Greek politicians may be struggling to agree a date for the general election (see 11.15am), but this hasn’t stopped them kicking off an unofficial election campaign.

From Athens, Helena Smith reports that party leaders have hit the campaign trail, giving interviews about their future plans:

In an interview with the Sunday edition of Kathimerini, the conservative New Democracy leader Antonis Samaras vowed to avoid enacting yet more recession-inducing austerity measures and appealed for voters to “untie my hands” by giving him an absolute majority.

A weekend poll, released by Public Issue showed, once again, that while New Democracy would emerge as the biggest party with 22.5% of the vote it would not win enough support to be able to form a single party government. This meant it would have to re-collaborate with the socialist Pasok whose own fortunes appear to have picked up since the former finance minister Evangelos Venizelos replaced George Papandreou as its leader last month. The poll showed Pasok garnering 15.5% of the vote – an increase of 4.5 percentage points.

Together the two parties would just about pick up enough seats in the 300-member parliament to be able to form a coalition – widely seen as the best case scenario for the debt-stricken country given the hostility to reforms.

Although Papademos last week insisted that a “silent majority” of Greeks want change, and certainly want to stay in the euro zone [as also borne out by polls] opposition to belt-tightening policies that are widely perceived as unfair, and given Greece’s contracting economy increasingly counter-productive, is never far away either.

Analysts expect street protests to re-erupt after the elections with trade unionists already speaking of June (when more measures are expected to be unveiled) as a “very hot month.”

11.27am: Another development in Greece – it is still struggling to finalise its bond swap deal.

The Greek Public Debt Management Office admitted this morning that 20 investors who hold Greek bonds issued under foreign law (out of a total of 36 investors who are holding out) have either rejected the government’s offer outright, or adjourned the talks without agreement.

These 36 investors all refused the original offer of a 70% haircut on their bonds, which expired on 8 March.

Greece has now extended the deadline for these bond-holders to decide whether to restructure their bonds until 18 April.

11.15am: News in from Greece, the country on the frontline of Europe’s debt travails since the crisis erupted, where Helena Smith, our correspondent, says the agonizing over when general elections will be held continues apace.

Helena writes:

A new week and indeed a new month started off in Greece with the nation being told that they would have to wait a little bit longer before an election date is finally announced. Regular readers will recall that the dates currently being discussed are April 29, May 6 and May 13.

“There is a process, an official process, that has to be followed,” the government spokesman Pantelis Kapsis said this morning. “A date for elections cannot be announced before the president of the republic hears it first … there are some outstanding legal issues,” he added insisting that while the date will “probably not” be made known this week, it would the following week.

The constant foot dragging has prompted not unreasonable debate that the interim coalition government is biding time. While May 6 was last week mooted as the most likely date, senior officials say “April 29th cannot be ruled out” and May 13, though less likely, “cannot be excluded either.”

With EU governments, especially Germany the provider of most of Greece’s rescue funds, being less than happy that the poll is taking place anyway, there is mounting speculation that technocrat prime minister Lucas Papademos wants to downplay the election as much as possible. That way, so the logic goes, passions over the prospect of yet more spending cuts can be contained as well.

“We have to say that the tough times are ahead of us. And they will be for many years – not necessarily in terms of the need for measures but in the sense that we are in a very deep crisis from which we will only emerge with a great deal of effort,” said Kapsis.

This would chime with (unusually candid) statements made by German chancellor Angela Merkel last week. Speaking to Czech broadsheet newspaper Lidove Noviny, she said: “I do not want to make anything look prettier than it is. Greece still has a tough path ahead, but it has gone a long way. The Greek parliament has approved harsh measures such as slashing the mimimum wage, so that the country can compete with neighbouring countries, for instance, in tourism. These are extremely tough political decisions which I appreciate a lot. They will bear fruit with time.”

10.40am: Europe’s youth unemployment crisis was laid bare by this morning’s jobless data (see 10.23am).

While the total youth unemployment rate across the Eurozone inched higher top 21.6%, it is running at twice that level in some countries.

In Spain, 50.5% of under-25s are now out of work. In Portugal, the figure is 35.4%, compared with 32.2% in Belgium and 31.9% in Italy.

The lowest rate was measures in Germany, where just 8.2% of under-25s were out of work, followed by 8.3% for Austria.

10.23am: Another blow to the eurozone – unemployment across the region has hit a new record high.

The unemployment rate across the eurozone jumped to 10.8% in February, from 10.7% in January, the highest level in at least 14 years (data only goes back to October 1997). There are now an estimated 17.134m people out of work in the euro area.

The picture is little better in the wider European Union, where the jobless rate rose to 10.2% in February from 10.1% in January. There are now 24.55m people out of work across the EU’s 27 members.

The data, coming so soon after today’s poor manufacturing statistics, casts a cloud of the euro region.

The youth unemployment rate was recorded at 21.6% in the eurozone, up from 21.5% in January, and 22.4% across the whole European Union.

As usual the unemployment rates showed stark differences between member states. The lowest unemployment rates were recorded in Austria (4.2%), the Netherlands (4.9%), Luxembourg (5.2%) and Germany (5.7%).

Spain remained the biggest unemployment blackspot, with a jobless rate of 23.6% (although new data for Greece was not available).

Martin van Vliet of ING described the data as ‘grim’:

The Eurozone unemployment figures for February make for grim reading and cast a dark cloud over growth prospects for the region.

The elevated unemployment rates in Southern-Europe are partly caused by structural factors, but also reflect the short-term economic pain inflicted by the draconian austerity programmes.

Van Vliet added that the stark differences in unemployment rates across the region make it even harder for the European Central Bank to set the right monetary policy.

Eurostat also reported that the female unemployment rate rose to 11.0% in the euro area and to 10.2% in the EU. For men, the unemployment rate increased to 10.7% in the euro area, and to 10.1% in the EU.

9.55am: With all the European manufacturing data now in, it appears that only three countries performed well last month.

While Austria, Ireland and the UK all posted manufacturing growth last month, today’s PMI data was bad news for several of Europe’s larger economies. For Greece, the data showed that its economy continues to contract at an alarming rate.

Here’s the highlights, and lowlights:

UK: 52.1 (an 8-month high)
Austria: 51.5 ( a 3-month low)
Ireland: 51.5 ( a 10-month high)
Netherlands: 49.6 (a 2-month low)
Germany: 48.4 (a 3-month low)
Italy: 47.9 (a 6-month high)
France: 46.7 (a 33-month low)
Spain: 44.5 (a 3-month low)
Greece: 41.3 (a 3-month high)

9.50am: The pound has hit its highest level for 2012, after this morning’s better-than-expected UK manufacturing data.

Sterling hit $1.6062, a four-and-a-half-month high, and also gained ground against the euro to €1.203.

9.40am: Britain’s manufacturing sector has defied the downturn in Europe, posting stronger growth in March.

The UK manufacturing PMI hit a 10-month high last month, Markit just reported, at 52.1. That’s the strongest performance since May 2011, fuelled by a rise in orders.

Rob Dobson, senior economist at Markit, believes the data is strong enough to ensure that manufacturing did not drag down UK GDP in the last quarter, commenting:

UK manufacturing has made a brighter than expected start to 2012.

Inflows of domestic and export orders also showed some improvement in March, but exporters are having to tap markets further afield as conditions in the Eurozone remain lethargic.

Here’s a graph showing how UK manufacturing has posted growth so far this year:

9.27am: Howard Archer of IHS Global Insight agrees that today’s manufacturing data indicates that the eurozone has fallen into recession.

Archer points out that only two countries — Ireland and Austria — posted manufacturing growth last month. The rest all contracted. He warned:

Furthermore, faster contraction in new orders and backlogs of work, bodes ill for manufacturing prospects at the start of the second quarter at least, while falling employment adds to concerns over the prospects for consumer spending.

9.21am: The word from Italy is that today’s unemployment data has been delayed — by demonstrators at the Italian statistics agency. According to Dow Jones newswires, the protest is organised by employees at the agency….

9.10am: Here’s a graph showing eurozone manufacturing output over the last decade:

The 50-point mark on the y-axis seperates expansion from contraction.

9.04am: It’s official — the Eurozone’s manufacturing sector has suffered a poor March, with total output falling across the region.

The eurozone manufacturing purchasing managers index came in at 47.7, a three-month low, and the eighth month in row in which output has shrank.

That reinforces fears that the eurozone has fallen into recession.

As reported this morning, Spain and France’s manufacturing sectors both suffered particularly badly last month. With Germany also shrinking, today’s data shows that the eurozone crisis has now reached the core of the currency union.

Chris Williamson of Markit, who compiled the data, warned that the data indicates that the eurozone economy shrank in the first three months of 2012 — putting it into recession. He explained:

Euro zone manufacturers suffered a miserable March.

Ongoing steep downturns in the periphery are now being accompanied by signs of renewed weakness in countries such as Germany and France.

8.54am: Alarmingly bad manufacturing data from France was just released — its PMI slumped to 46.7 in March, meaning the sector contracted after posting flat growth in February.

Germany’s PMI was also recorded in negative territory, at 48.4.

8.48am: Italy’s manufacturing sector contracted again in March, for the 8th month in a row.

At 47.9, the Italian PMI (just released) was a slight improvement on February’s 47.8, but still showed that the sector shrank again.

We get the full eurozone PMI data in a few minutes….

8.35am: Here’s another photo from Saturday’s protests in Milan (see 8.30am for more):

…showing a puppet of Angela Merkel which was dangled outside the city’s stock exchange.

8.30am: Is a backlash building up against Mario Monti?

Over the weekend, protests took place in Milan against Italy’s technocratic (unelected) prime minister and his programme of economic reforms, tax rises and spending cuts. The rally, organised by trade unions and left-wing political parties, marched to the Milan stock market carrying banners. One read “Technical government, but still a thief”.

The demonstrators also carried puppets of several European leaders — here’s a photo of the Mario Monti version:

The Italian government has been making noises about the need to temper the austerity agenda. This morning, industry minister Corrado Passera told CNBC that Italy will lobby other EU leaders to agree new growth-boosting initiatives.

Passera explained that fiscal consolidation could not work without accompanying growth:

If we don’t guarantee the medium-term sustainability through the right level of growth, we are [back] at the beginning of the problem.

8.17am: Today’s manufacturing data has dealt another blow to Spain. Its manufacting output shrank last month, at a faster rate than in February, underlining the parlous state of the Spanish economy.

At 44.5, the Spanish PMI was its weakest since last December. As this graph shows, Spanish manufacturing has been shrinking (ie, a PMI below 50) since early last year.

That reinforces fears that Spain slid back into recession in the first three months of 2012.

8.05am: Some good news for Ireland — it’s manufacturing output rose last month for the first time since last October, and at the fastest rate in almost a year.

The Irish manufacturing PMI rose to 51.5 in March, from 49.7 in February. That puts it over the 50-point mark that separates expansion from contraction. Employment across the sector also increased.

The recovery was attributed to the strength of the US economy, and comes just a few days after Ireland slipped back into recession.

Speaking of Ireland — yesterday, prime minister Enda Kenny pledged that the country will neither default on its debts, nor reject Europe’s fiscal compact.

At the annual party conference of his Fine Gael party, Kenny declared:

Ireland will not default. But we are determined to ease this burden on our people. That’s why we are negotiating with our Troika partners to find a cheaper way of financing the cost of bank recapitalisation.

Before the speech, there were lively scenes outside the conference hall as people protested against the latest austerity measures — a flat €100 charge levied on each household.

7.58am: Today’s agenda is dominated by the latest manufacturing data for last month (dubbed PMIs, because information from purchasing managers is used to calculate the latest index).

We also get the latest eurozone unemployment data, which is unlikely to be good news (economists think the jobless rate has risen again)

Here are the main releases:

• The overall eurozone manufacturing PMI for March: 9am BST / 10am CET
• UK manufacturing PMI for March: 9.30am BST / 10.30am CET
• US manufacturing PMI for March: 3pm BST / 10am EST

• Eurozone unemployment data for February: 10am BST / 11am CET

7.45am: Good morning, and welcome to the start of another week of rolling coverage of events in the eurozone crisis.

In the financial markets, it’s the first trading day since eurozone ministers agreed to boost the Eurozone firewall by €500bn. We’ll be tracking the reaction across Europe to the deal, which fell short of some expectations.

Public anger against the eurozone crisis continues to bubble away – there were protests in Milan over the weekend against Mario Monti’s government (of which more shortly…)

And with the firewall issue agreed, attention is turning again to the health of the world economy. We’ve already had the latest manufacturing data from China, which beat expectations and hit an 11-month high. Similar data from the eurozone, the UK and the US is due today.

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