Category: Uncategorized

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.

Give the guy a break?

Make no mistake. Trump’s behaviour in the last two weeks in office was highly objectionable, if not much worse. His call to the mob was indeed outreagous.  As CNN loves to repeat, the peaceful transfer of power is the hallmark of every democracy, first among them the United States, where there is a constitutionally long transition period that is required in part also by the complexity of the government.

However, we learned in school that the institution of impeachment applies to sitting presidents,  in order to attempt to remove them for having committed the highest crimes in the book, including treason. While it isn’t clear that it shouldn’t apply to a president in the last days of his term, as Trump was, impeachment wasn’t framed by the founding fathers as a way to continue a political fight once the president has left Pennsylvania Avenue. The Democrats have four years now to prove their case to the American people and if the Republicans were to run again with Trump in 2024, they will have to beat him at the ballot box.

One fails to see how the continuation of this vendetta post his term will help the healing of the nation and especially Biden’s agenda. Paraphrasing  Nikki Hayley, our preferred Republican candidate for 2024: give both guys, Trump and Biden, a break!

Looking for Maitre d’s….

London is well known for being perhaps the most international city in the world. At last count it was the sixth ‘city’ of French citizens, with up to 400,000 French citizens living in London. Similarly, there are over 100,000 Italians living in London. Traditionally many Italians have been working in the hospitality sector, even though in recent decades the share of professionals, such as bankers has grown considerably.

Initial data, published by the FT, seems to suggest that 700,000 foreigners have left London since the outbreak of Covid-19, most of them from the hospitality sector. London is an expensive city to live in, not famous for its weather, and with shops and restaurants closed for most of the last 12 months, its attractions for foreigners have faded big time. Even the ones that still have a job but are WFH, whose kids are LFH are increasingly looking at spending more time back on the continent in the absence of having to report to work or school physically.

The big question is if and when these expats will come back to London once the Covid-19 crisis subdues?

It is safe to believe that once conditions permit, school attendance will return to normal. But what of colleges and universities? And offices? The working from home mode if it persists can change the dynamics of the job markets and of our big cities in ways that are still difficult to fully appreciate.

The Middle East Change of Tune

As we watch yet another El Al airliner land in an Arab capital to cement the fourth peace agreement between Israel and Arab states, one cannot fail but to grasp several important differences between these successful bouts of diplomacy as compared to the failed ones of the last three decades.

Firstly, this is the triumph of the concept of peace for peace rather than the land for peace dogma of the previous failed peacemakers, such a Yossi Beilin, Shimon Peres, Bill Clinton, and especially Barak Hussain Obama.

Second, it proves the old concept that absentees will always lose. By putting themselves in an untenable and non-pragmatic position, the Palestinians have lost their place at the table, and the simple truth is that the world and the middle east are moving on.

Further, it is a pleasure to hear the leader of the Israeli delegation, Mr. Ben-Shabbat speak to Arabs in the language they understand. His first words both in the UAE and in Bahrain where words of peace and faith spoken in perfect classic Arabic. It has taken nearly seventy years for Israel to recognise that in order to negotiate with their Arab neighbours they should put at centre stage Jews from Arab countries who know how to speak to their Arab cousins, and actually share many of their values, rather than the standard mittel-European secular Israeli politicians who represent everything that the Arabs despise.

Finally, it is a testament to the courage and foresight of leaders such as Benyamin Netanyahu and Donald J Trump, who had the courage to change tracks, jettison the old adages and embark on a ‘peace from strength’ mode which recognises that the world has changed, that Israel is the regional power, not only militarily, but also politically and economically, and that having diplomatic relations with it, under the protective cover of the United States, is a win-win for all.

Portable Jobs

New York and London’s white collar workers are among the highest paid in the world and for good reason. Skill levels are high, competition is strong, and cost of living is nearly prohibitive, especially housing. Smart working, if it continues beyond the immediate future, as Schroders’ announcement last week seems to signal, could change all of this.

Granted, some jobs require locally trained staff, for example accountants and lawyers need to be locally trained to be able to practice in a particular jurisdiction. But many other high skilled jobs, such as investment bankers, brokers, IT specialists, programmers, real estate professionals, have universal skill sets. Once the pandora’s box of working from home is open, it doesn’t matter if home is in Sussex or Long Island, or in Ukraine, Mexico, France, Israel, Ireland, places where talent is abundant and cost of living is much lower.

Governments should think very hard about the horizontal repercussions of continued smart working, including with regards to real estate prices, local micro economies, such as restaurants, pubs, shops, and crucially employment. If the marketplace for skills is now worldwide (as long as you speak English), then the cost of labour is bound to go down, unemployment in rich countries to go up, and social peace to suffer. Tinker with the system at your peril.

Trading Hot Air

As any experienced negotiator knows, one of the key tactics in complex negotiations, is to include in the ‘Ask’ certain items that one is happily willing to give up. Doing so enables the other side to rationalise that after all, both sides are giving up on certain issues. A top negotiator will even create a crisis item that is completely artificial, but seems very credible, in order to be able to use it as a bargaining chip.

A master negotiator is able to do this on the world stage. Benjamin Netanyahu is certainly such a master negotiator. He was able to ‘sell’ a standstill on the sovereignty issue over parts of Judea and Samaria in exchange for full recognition and relations with a key growing Arab power like the UAE. He got a top result by giving up something that either was never going to happen, or at the very least was already not actual, given that Trump has the proverbial bigger fish to fry at this time.

On the media front, Bibi scored another key ‘win.’  There are two ways to win a confrontation, the first one is to simply defeat your enemy, the other is when the enemy acknowledges your position. This is what is happening today in Israel, with the uber Liberal Haaretz daily having to admit: “In UAE Deal, Netanyahu Trades Imaginary Annexation for Real Life Diplomacy Win.” It doesn’t get sweeter than that.

Hail to the Chief?

Americans were once known to have a high degree of respect for the office of the presidency, irrespective of who was the current incumbent. In particular, there was a bipartisan understanding that ‘like him or not,’ he is the elected commander in chief. When Israeli PM Benjamin Netanyahu was asked by Congress to address them in March 2005 to discuss the topic of the imminent Iranian nuclear threat, many democrats decried the invitation, and the speech, as an affront to the presidency. Today, no more. The New York Times is of course no fan of Mr. Trump, but these days they appear to be very tame when compared to the vitriol coming out of CNN, whose journalists and anchors can’t literally go an hour without attacking, criticising, ridiculing, and disparaging their sitting president. Of course, Trump is no saint and he has faults of his own for discrediting his credibility, for which he should be appropriately criticised. The problem is that when the discredit came from a democratic president who violates the ‘sanctity’ of the Oval Office, or the other one who drew red lines and then forgot about them, we didn’t hear the respective voices or the pens of Wolf Blitzer, Roger Cohen and Thomas Friedman scolding them in anything close to the same way they daily abuse the 45th President.

The Stay at Home bill is coming

After three months of relentless Stay-at-Home/Stay Safe messages, the major Anglo-Saxon economies are beginning to understand that these measures, while thoughtful, are simply unaffordable in today’s economies. Recently the US Treasury Secretary Menuchin admitted that ‘second wave’ or no second wave, there will not be another lockdown; why? Simple, it’s not affordable. Today the UK announced that April’s GDP was down a staggering 20%+! Do you think that they will lockdown again?

Both the UK and the US have long wagered their future on the service economy. While some have been continuing to work from home, this was clearly not enough to prevent a major shock. Keeping hotels, shops, airliners, and offices shut for three months has cost us a staggering amount. The only difference between 2020 and 1929, is that this time, a combined torrent of monetary (as after 2008) and fiscal stimulus (as after FDR’s election) have sedated the patient. But the patient is now waking up and the pain is beginning to be felt. Don’t forget that the Great Depression only ended because of and after WWII.

The unfortunate truth that governments don’t want to admit is that even the wealthiest economies simply can’t afford these lockdowns and have now shot their bullets. The protracted lockdown has most certainly saved lives, but it has come at a huge cost. Consider the damage being inflicted on children staying at home, on wives being abused, on seriously ill patients not getting their essential care. As Yonathan Rosenblum brilliantly said a few weeks ago, the trade-off is not necessarily between lives and money, as the Economist put it at the beginning of the crisis. It is rather between lives and lives.

Governments should prepare for the next wave, or G-D forbid, the next pandemic, in a much more clever and cheaper way. They should protect the older population and the ones most at risk, while investing in multiplying hospital beds. If you consider that it costs $13bln to build and fit another aircraft carrier which will probably never be used, while that money could be used to build nearly one hundred  200-bed hospitals (20,000 beds in total), you can get an idea of where the funding can come from…

Irrelevance: Europe’s Eventual Demise?

If there was a time when a top down concentrated effort was needed from Brussels, the Coronavirus crisis should have been the textbook reason as to why it makes sense to have such a European overstructure.

What could central Europe have done?

Medically: enforce a similar quarantine for all the Schengen countries. Why? So that when one country reaches the peak and infection rates start receding, they will not be forced to close internal borders (intra-Europe) to stop late reacting countries’ citizens from starting the infection all over again.

Economically: create a level playing field in terms of unemployment benefits, tax breaks, rent assistance.  In addition, a synchronised quarantine that can end at roughly the same time, would allow inter block tourism and business travel to start again very quickly.

Instead, what did we get: a wide spectrum of reactions ranging from Laissez Faire to police enforced quarantine, medically. And economically we got Ms Lagarde’s stuttered response that costs markets hundreds of billions of euros.

Maybe it’s time to send all these Brussels bureaucrats home and invest the savings in the member state economies?