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December 20, 2017

Down with the gown

Once a divorce is on the table, everything comes under scrutiny: past behaviour, assets, and joint ventures. Every stone is turned. A painstaking process for everyone involved. Brexit may do the same for Ireland, in particular. They already found 142 areas where regulatory equivalence is required to make good on British promises on the border. The following story reminded us that there is a lot much more that can be tripped up by this process. 

Irish universities are running tenders for their graduation gowns, but only a few firms get chosen for long term contracts. The Irish Times found that four companies supplying gown hire and photography services to graduating third-level students are all controlled by the same London owner, and all operate from the same Dublin address. The links among those four different companies all go back to the London-based Ede & Ravenscroft, which was founded in 1689 and is thought to be the oldest tailoring firm in the world. Irish universities promised to do more to foster competition, and end the monopoly position of this London firm.

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December 20, 2017

How to overcome the political gridlock in Italy

Italy is the proverbial example of a country whose position in the eurozone is simultaneously unsustainable and without concrete alternative. The political situation is in strong flux right now, but possibly not so strong that it will end the political gridlock resulting from the presence of three large party grouping, each unwilling to form coalitions with the other. Even Germany is not immune from such gridlock, which is an inevitable by-product of all systems of proportional representations.

Corriere della Sera today has a useless additional analysis of the raw polling data it initially published over the weekend. Those had shown a further weakening in the support of the PD, which is part of a clear trend that in our view has not yet run its course. 

Here the latest projections how the polls were to translate into governing majorities. The second of those charts shows the dynamisms of the trend against the PD in the last few weeks. 

 

Logic dictates that any outcomes that would resembles such a three-party gridlock would eventually require a coalition of those parties - PD and Forza Italia would not have a majority, not even with the Lega or the left. A coalition of PD and Five Star is at least numerically possible, but not politically, especially as we expect Five Star to become more radical as the centre-right becomes more centrist. A coalition of the populists - led by Five Star and Lega - is another option, but against without a majority. 

What happens if such a result came about? We reported by that President Sergio Matterella is considering leaving Paolo Gentilone in office while negotiations last. As Corriere della Sera reports Silvio Berlusconi finds this preferable to a technical government, which has been the usual answer to political gridlock in the country. Gentilone would continue not in an acting capacity, but endowed with all the paraphernelia of power of an elected prime minister.

Is there support for a grand coalition? Like in Germany, the members of both parties are deeply sceptical. And unlike in Germany, the two sides do not believe that they have the necessary numbers, at least not without the support either of the Left, which would make such a construction unpalatable to Berlusconi, or the Lega, which would not work with the PD. One option people are discussing is a hybrid between political and technical government, but it all shows how desperate the situation is - given the current polls. 

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December 20, 2017

Varoufakis is suing the ECB

Yanis Varoufakis and the MEP Fabio de Masi from Die Linke sued the ECB recently to gain access to the internal legal opinion that led to the ECB’s decision to freeze vital ELA funding to Greek banks at the end of June of 2015. It was a historic moments, leaving Alexis Tsipras no choice but to shut down the banks, impose capital controls, and start negotiations from a weakened position. Eventually Varoufakis resigned and Tsipras made a deal with the creditors that granted Greece funds in return for more austerity measures. 

The ELA agreement prohibits national central banks from providing ELA if it "interferes with the objectives and tasks" of the ECB, such as maintaining price stability and safeguarding payments. Varoufakis' and de Masi's lawyer says they want to expose how the ECB and its legal experts weighed different objectives and interpreted the legal framework. 

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