Month: February 2021

The Vaccine Saga

Italy is a country historically rife with conspiracy theories.

In the past, they have ranged from who were the political backers of the Red Brigades (the Americans or the Russians?), to why Juventus wins so many championships (the Agnellis control everything), to how gnomes in New York play with Italian politics by ‘adjusting’ the BTP/Bund spread. There are many more examples.

Today, the mother of all conspiracies is why Italy is not getting enough people vaccinated. The argument goes that other non-European countries are somehow deviating Italy’s supplies of vaccine. The reality is that Italy is suffering the results of the incapacity of the EU to manage the centralised purchase of the vaccines for hundreds of millions of Europeans at the same time. The EU is an institution that is quite good at putting on the brakes, not at swiftly making things happen. The EU’s executive is appointed and not elected. Its appointers are not looking for charismatic leaders that could eclipse them, they are rather looking for dependable administrators who will follow the protocols. The problem is that the EU had no experience in negotiating purchase agreements of this size and in order to ensure it be seen to do the right thing, it wasted precious time in negotiating with a fine tooth comb and arguing for better prices. The problem is that it didn’t recognise that there are times when price is irrelevant and redundancy crucial. Israel and the UK understood much earlier that it doesn’t matter if you pay $30 (apparently what Israel agreed to pay) for a vaccine or around $10, like the EU did. Every extra week of lockdown is worth a lot more than a few dollars of savings, especially in the midst of a pandemic.

Mario Draghi is credited for having saved Italy and the EU in the midst of the financial crisis. He will now have to apply his ‘we will do whatever it takes’ modus operandi to independently acquire vaccines if he wants to prevent League leader Salvini and his Fratelli d’Italia colleague from running on a very popular vaccine-denial, anti Europe platform in the near future.

Learning the lessons?

This week marks the approximate anniversary of the arrival of the Covid pandemic in mainland Europe. It is notable that while certain towns and regions in Italy were already in lockdown mode at this time last year, other countries such as the United States seemed to be immune until March. On this day last year, we were in Florida where everything was open and masks were unheard of. Meanwhile, Italy was already testing the body temperature of arrivals at airports, and beginning to curtail flights from China.

In the UK it was still more or less business as usual. In fact you may argue that it has taken the UK twelve months to get a hold on its borders, as the harshest measures have only been introduced in February….. 2021!

Consider the difference. Granted that we are worried about mutant viruses, but as of today, the UK has administered over 18m doses of vaccine; if you take into consideration the subjects who are somehow immune, or protected, because they had the virus already, and children who don’t seem to get sick, we are now getting close to 50% of the population being vaccinated or immune. In addition, one year ago, the UK had no real testing capacity. Today they are doing many hundreds of thousands of tests per day.

One would have thought that the borders should have been closed (especially to China) when the disease was difficult to diagnose (for lack of testing capacity) and non-curable/preventable (no vaccines and no effective therapy), and that the restrictions should be relaxed now that the combination of cheaply available testing and vaccines are an effective barrier to contagion. True, it is not proven that vaccination means non transmission. It is also true that testing (especially rapid testing) may not be exact; however, public policy in almost every field aims to minimise and not eliminate problems and to balance prevention with the negative effects of limitation of liberties, commerce, travel etc. No government gives its citizens a guarantee that the streets will be 100% safe from crime. Covid prevention should also fall into the minimisation rather than elimination, bucket.

From Mario to Mario… there was none like Mario

When in 2011, the then President Napolitano asked Mario Monti to form a new government of technocrats, Italy wasn’t very far from its own version of a financial crisis. Credibility in Europe and in the financial markets was near record lows, and the new Prime Minister assumed his role by promising an economic version of “blood, sweat and tears.” His job was to cut costs, increase taxes, reduce the budget deficit and therefore resume Italy’s access to financial markets, a very delicate matter for a country with one of the highest Debt/GDP ratios. Professor Monti succeeded to a certain extent, but his government only lasted two year. By that time his political capital was eroded by having to administer such bitter medicine.

Roughly ten years later, President Mattarella gave his approval a few days ago to another professor, another Mario, the Central Banker emeritus Mario Draghi. While certain circumstances are similar, their mandate couldn’t be more different. Whereas Monti had to cut the budget deficit and start reducing the national debt, as a proportion of GDP, Mario Draghi’s mandate is twofold. He will need to ensure that Italy gets its full allocation of the recovery moneys, which have already been generously earmarked for Italy, and even more importantly, he will have to ensure that those funds are spent well, so that from the ashes of the crisis, Italy can find its renaissance. Both Marios’ jobs were and will be challenging, but the big difference is that Draghi will put money in people’s pockets, whereas Monti had to do the opposite. If Italy ever had a chance to emerge from nearly two decades of stagnation, Mr. Draghi is its best chance.

Mr. Monti’s political career ended quickly with a failed election and he soon returned to academia. Mr. Draghi probably has no intentions at all to stay in politics. He has a mission to do, and he has the skills and the credibility to get it done in the two years before Italy’s next general election.