*Al Stewart’s haunting song about the last time the Germans were in charge. Now you’re asking yourself, what does this have to do with Dauntless and how are events from 75 years ago applicable to today. Having Dauntless in Europe, gives me the freedom to visit my friends in Italy at a more leisurely pace than any time in the past. Besides drinking Prosecco, I have the time to think and observe. It’s quite nice really, but I’m seeing many disquieting signs and the fact that I am at this moment, sitting on the couch, writing this while wearing a tee shirt, a turtle neck, a sweater and a vest, while wondering if I could type with gloves on, says more than I could ever explain about the anemic Italian economy.
Driving from my friend’s house on the outskirts of Treviso to the little mountain village of Budoia, is a route I have taken countless times in the last 38 years. It’s a route that provides a lot of variety, from the large factories, stores and shops along the main Venezia to Pordenone state road to the road that skirts the mountains from just north of Conegliano and passes through towns, each with its town center and stores common to almost every town.
This trip however has been an eye opener: shuttered factories, vacant parking lots, closed stores. During the last 20 years, I have probably come to Italy almost 20 times and seen the same towns and roads. By not living here, it is easier to see the gradual changes that have taken place. Even in a Province like Treviso, probably one of the richest in the country, one sees vacant stores and prices that hare far higher for virtually everything than one would pay in Germany or the Netherlands.
This annual snapshot shows a continual decline, only stopped at times with a leveling, a plateau, but not real growth. The advent of the Euro has locked in this decline, but the last few years have seen an acceleration of this decline.
Oh my friends are hopeful, yes, things are tight, but they will get better… it’s a refrain I hear every year.
I on the other hand, see a picture, not so bright and getting even darker. I’ve never seen so many vacant shops as I see today, but in those vacant shops and factories, I also see the Euro and its impact on the places south of the Alps. The refrain throughout Europe is the Germans, that altruistic lot; do not mind paying large subsidizes to help their less fortunate neighbors. But in those vacant places, I see the real motive; whatever Germany must pay to keep the southern littoral in the Euro is worth it, as it eliminates European competition.
Having close friends in Germany also, and visiting there only a bit less than Italy, I see another side of the story. I wonder why prices are actually lower in Germany and the Netherlands, yet their average salaries are much higher than in Italy. In the old days, I did most of my shopping in Italy, with Germany second and the Netherlands third, and that was based on price. While the quality of goods was a bit better in Germany, especially clothes, the prices were significantly higher.
With the advent of the Euro, everything got turned on its head. I have not done any significant shopping in Italy in 15 years. Prices are totally out of whack; whatever it is, I know I will find it cheaper in Holland or now, Ireland. Italy is also flooded with items made in China. It’s become the Wal-Mart of Europe. So now the land is flooded with LED light bulbs that inexplicitly, turn off for a second or two every couple of hours. Houses are heated or not, to an ever lower temperature. Every few years I must add an extra layer. Soon I’ll be as tasty as a 6 layer cake.
Here is a little story I first heard on CNBC’s Squawk Box I think it’s worth repeating:
Michelle Caruso-Cabrera recounted the comments made by Margaret Thatcher in the 1990’s. Ms. Thatcher was saying how she had asked the Italian Prime Minister why he thought joining the Euro zone was going to help Italy? He responded that it was the only way for Italians to have any fiscal discipline.
I had not planned on recounting this story until one of my Italian friends used the Euro as the same excuse. But I wonder, what fiscal discipline have the Italians shown in the last 15 years?
In fact, to a certain extent, the Italian bond market certainly does not reflect the coming train wreck and has contributed to spending that cannot be sustained, well, it can be as long as the Germans are there to help!
This brings us full circle back to Al Stewart’s haunting song, Road to Moscow. The last time the Germans were calling the shots, the Italians lost an entire division of Alpini on the eastern front, never to be seen again. In this region of Italy, the Veneto, it’s not been forgotten. Who knows if the Italians will ever have the discipline to cut the waste and fat that so many in this society benefit from, but one thing I have figured out in my life, it’s far better to suffer the consequences of one’s own mistakes, than those of others.
So, let’s see if the Italians can be their own masters and become competitive again, while they won’t be cannon fodder, they will be Euro fodder.