Lira Lessons from Argentina

The Economist's 'J.O.' on what it would mean to leave the euro:

Creating a new currency is not that difficult. A determined country could simply pass a law saying that all financial dealings should henceforth be conducted in the new lira (or drachma, or escudo, or whatever). Colleagues who have covered Argentina tell of how, in August 2001, the province of Buenos Aires issued $90m of IOUs to employees as part of their pay packets. These bills, known as patacones, were soon widely accepted in exchange for goods and services. McDonalds even offered a special “Patacombo” menu in exchange for a $5 denomination IOU. Argentina broke its "irrevocable" currency peg to the US dollar a few months later.

That's not how I read the history. How I read the history is that McDonalds was one of the only companies that would take patacones, and even then only if you had exact change. Other companies hoarded pesos (or USD) and moved them out of the country if they were able. Withdrawals of pesos from banks was strictly limited under corralito so patacones had some use, but there was a general shortage of goods and services in the economy so no currencies (besides the USD) could truly be said to be "widely accepted". As I read the history, the workers who suddenly found themselves paid in patacones surrounded government buildings in Buenos Aires in protest and demanded they be paid in pesos. The use of patacones, while perhaps the only option for a provincial government that couldn't pay its debts any other way, was a disaster and the currency was only in substantial use for a short time.

It's possible I've got my history wrong, and J.O. certainly is not arguing that issuing a new currency is painless. But I don't think it's quite as simple as (s)he says.

Trivia Time (E.U. Currency Arbitrage Edition)

Q. What does this quote refer to:

“A hundred years have passed,” the article noted, and “we Italians still have to put up with the same old filth.”

Is it:

a. Caricatures of Italians as mafioso in American pop culture.

b. Poor inspection of canned tomatos by the Italian government leading to an outbreak of salmonella.

c. Swiss xenophobia.

d. Corruption in the Italian parliament.

If you answered "c.", congratulations. Apparently a far-right Swiss party has been running explicitly racist ads that portray (Italian) rats nibbling on Swiss cheese. The rats represent legal Italian immigrants who work in Switzerland, which borders Italy to the north. It seems that this stems in part from the fact that Switzerland has ratified labor accords with the E.U., but has no adopted the Euro:

The global financial crisis has accentuated tensions here, especially since border workers began moving from jobs in sectors like construction, factory work or domestic help to jobs in areas that the Swiss hold sacred, like banking. ...

In the past, Mr. Rusconi said, “you had to beg Swiss graduates” to work in advanced service sectors like banking, insurance or financial services. “Now you have qualified people speaking four languages who are unemployed” because of competition from equally qualified Italians, who work for less money because exchange rates favor the Swiss currency. Claudio Pozzetti, a representative of the Italian trade union C.G.I.L. for border workers said this claim was untrue.

“And we have to fork out unemployment insurance to these young Swiss, so the damage is twice as great,” Mr. Rusconi said.

Nice little bit of currency arbitrage for Italian workers: Italians work for Swiss francs (which have recently strengthened relative to the Euro, prompting attempted devaluation), convert those to Euros, and pocket the difference. Swiss workers face increased competition, which flattens wages and increases unemployment. Swiss employers save money by hiring Italians. Add it up and you get vicious racism from the largest party in the Swiss Federal Assembly. Great.

You know Europe's in bad shape when even meek Switzerland is all messed up.

UPDATE: A commenter reminds me that the SPP has a tradition of being vicious racists, which I knew but had somehow forgotten about. Previous installments have especially focused on Muslims. Remember the minaret ban? See here and here and here for previous examples.

OT: European Stuff

How bad is it in Italy these days? Those who hope for democracy, including those on the left, now largely support a post-fascist who was an ally of Berlusconi's until very recently. A man who once said "Mussolini was the greatest statesman of the century. There are periods in history when freedom isn’t one of the most important values."

Yikes. Yascha Mounk does a number on Gianfranco Fini here, and goes after the rest of the European right (and much of the left) here.

Today's Lesson in Cognitive Dissonance

Blatent:

President Nicolas Sarkozy of France vowed to keep dismantling illegal immigrant camps and rejected complaints that the French authorities were racist and deliberately targeted the Roma for deportation.

Right. And West Bank settlers aren't deliberately targeting Palestinians, and Arizona lawmakers aren't deliberating targeting Mexicans, and Italy isn't deliberately targeting gypsies, and France's Burkha ban isn't targeting Muslims, and etc.

Berlusconi Gets OWNED!

In case you haven't been following some of the Italian dailies lately, Silvio Berlusconi, a constant source of entertainment on this blog (along with our friends Hugo, Evo and Kim - not good company) and one of Italy's richest men who also happens to be Prime Minister, recently had a hair transplant. This comes a month or so after being smacked in the face with a mini-statue, having his tooth chipped and his face all bruised up.

Bill Gates, feeling that the mini-statue wasn't enough punishment for being a creepy old dude and the most vain politician on earth, went after Berlusconi today for the recent hair transplant in light of Italy's dismal foreign aid numbers.

From FP:

"In a clear reference to the notoriously image-conscious Berlusconi, Gates told Süddeutsche Zeitung: "Rich people spend a lot more money on their own problems, like baldness, than they do to fight malaria."

Italy's foreign aid budget was approximately 0.11% of its GDP in 2009, one of the lowest figures among developed countries, and half of what it was even in the prior year. Gates didn't mince words on his views:

"Dear Silvio, I am sorry to make things difficult for you, but you are ignoring the poor people of the world," he told the Frankfurter Rundschau.

Absolutely fantastic! Italy's foreign aid numbers are pretty damn bad, but when Silvio wants some new plugs, Silvio gets some new plugs.