Giuseppe Conte: The New Italian Prime Minister – 6 remarks

Giuseppe Conte has been appointed Prime Minister by Italian President Sergio Mattarella. The next step is the formation of the government that will reflect the balance of strength between the 5-star Movement and the League.

Several remarks

1 – Conte is the lowest common denominator between the two parties of the coalition. He will not have much room for maneuver. Continue reading

Italy in 8 points

The Italian question remains a concern for Europe, even after the nomination of a prime minister (to be confirmed by the Italian president), who is something of a lowest common denominator between the Five Star Movement and the League. Investors are breathing a sigh of relief, with the yield spread with Germany widening at a comparable pace than last week, as shown in the chart. However, many questions remain.german-it-spread.png

A number of points are worth raising:

1 – Italian malaise
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Emmanuel Macron’s first anniversary as President – part 2 Europe

After just one year it is still too soon to make a full assessment of the Macron presidency, so the question we must answer is whether the measures taken by his government over this first year are the rights one to tackle the changes we have witnessed worldwide.

In part 1 of this series, I outlined the need to make growth more self-sustaining, even in a context of ongoing globalization. I described the need to raise the innovation aspect in our investment, and the necessity of making the labor market more adaptable to better address change. Recent research by Gilbert Cette et al uses a broad international comparison to suggest that high employment protection legislation in France leads to capital-to-labor substitution. This would explain high investment levels in France. However, the authors note that the innovation component of this investment is inadequate and does not sufficiently bolster productivity. Another conclusion of the report is that a more flexible labor market means higher quality capital.
And this equation lies at the very core of the supply question in France: capital needs to be more efficient, while the labor market needs to be more flexible in its ability to adapt. I noted in part 1 that steps taken to support public investment along with government labor market decrees help ease these restrictions and promote an adjustment in supply.

But we have seen two other watersheds in the world economy that the French economy must now address if it is to further integrate i.e. the location of production and the location of innovation.

The second shift is the geographical location of production. Continue reading