MILAN // The Dolce Vita lasted for a long time in Italy, but now it is back to reality.
Postwar prosperity allowed hundreds of thousands of workers to retire with full benefits before the age of 50.
Public spending ran over, creating bloated bureaucracies and a political class that consume half of the national wealth generated each year.
Easy-going Italians, expecting little from the state, rarely think twice about paying under the table for home improvements, dental work or even a frothy cappuccino.
But the bill for decades of excess is coming due, and the price to escape Europe's sovereign debt crisis is steeper than many feared.
The premier, Silvio Berlusconi, a tenacious leader who has survived sex scandals and multiple criminal prosecutions to head three governments since 1994, is losing his grip on power and lacks the political muscle to push through change.
During an economic summit in France, he asked the International Monetary Fund to monitor the country's reform efforts, a humiliating development for the world's seventh largest economy.
The deepening crisis has already shaken three governments - in Ireland, Portugal and Spain, where early elections are scheduled in two weeks - and Greece's Socialist-led government is struggling to form a unity government after narrowly surviving a confidence vote. Many believe Italy would be next.
"Berlusconi's time is up," Ferruccio de Bortoli, editor of the leading Italian daily, Corriere della Sera, wrote this week. "He risks bringing down his party, which should push him to leave, and above all the whole country."
The government's turmoil reflects a deepening unease about the financial uncertainty that was gathering over the country.
Italians, still hurting from the 2008 financial crisis that slowed factories and idled workers, were paying with continued economic turmoil and austerity moves that were hurting consumer confidence.
The broader fear was that Italy, if it faces default on its enormous €1.9 trillion (Dh9.6tn) debt, would drag down the euro zone, if not the global economy.
"We, the young ones that pay the highest price, we are the ones who are paying for the crisis," said Giuseppe Muscanera, a teacher from Bologna, at an opposition rally in Rome on Saturday, where protesters demanded Mr Berlusconi's removal.
"We can start rebuilding through a serious governing class, with ideas, that wants to work," he said.
For at least a decade, Italy has been getting by with high public debt and low growth without setting off major warning bells.
Unlike their government, Italian households save a lot and a majority own their own homes. This insulated the country from the real estate crashes and private debt crises that hit other economies, such as Spain, so hard in 2008.
Unlike many eurozone countries, even rich and stable Germany, Italy did not have to bail out its banks during the 2008 global credit crunch because they had avoided excessive risk-taking.
But the past two years' sovereign debt crisis has changed all that.
After Europe was forced to bail out Greece, Ireland and Portugal, investors reviewed their assumptions about how risky government bonds in Europe were.
Fearing the worst, many traders started selling their Spanish or Italian bonds in favour of the safer ones, mainly from Germany.
Some economists have blamed Europe's slow and indecisive handling of the debt crisis for allowing investors' concerns about bigger economies to grow.
The possibility that Italy may need a bailout rises each time its borrowing costs go up.
Borrowing rates on 10-year bonds reached a euro-era high of more than 6 per cent last week.
Italy's new chief central banker, Ignazio Visco, said Italy can survive with rates of up to 8 per cent, but the extra cost of borrowing was eroding the savings the government gleans from its austerity measures. That sort of downwards spiral was what has pushed Greece to need multiple bailouts.
To avert default, Mr Berlusconi's increasingly fractious governing coalition was under intense international pressure to approve and implement measures to balance the budget and spur growth - the only sure way to bring down national public debt. But infighting has been hindering those efforts.
After failing to come up with emergency measures that would take immediate effect this week, Mr Berlusconi proposed legislation that he promised to put to a confidence vote within two weeks. If he loses, he must step down.
The new measures include a plan to sell government assets, which was expected to raise €5 billion a year over the next three years, and tax breaks to encourage employment for the young and to get women back into the workforce in a country where youth unemployment runs at 29 per cent and just 48 per cent of women have jobs.
The legislation would also allow stores to stay open on Sundays and open up closed professions.
Mr Berlusconi has also pledged to raise the retirement age to 67 for all classes of workers.
The way forward was uncertain, however, as entrenched interests make change difficult in Italy.
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
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Essentials
The flights
Emirates, Etihad and Malaysia Airlines all fly direct from the UAE to Kuala Lumpur and on to Penang from about Dh2,300 return, including taxes.
Where to stay
In Kuala Lumpur, Element is a recently opened, futuristic hotel high up in a Norman Foster-designed skyscraper. Rooms cost from Dh400 per night, including taxes. Hotel Stripes, also in KL, is a great value design hotel, with an infinity rooftop pool. Rooms cost from Dh310, including taxes.
In Penang, Ren i Tang is a boutique b&b in what was once an ancient Chinese Medicine Hall in the centre of Little India. Rooms cost from Dh220, including taxes.
23 Love Lane in Penang is a luxury boutique heritage hotel in a converted mansion, with private tropical gardens. Rooms cost from Dh400, including taxes.
In Langkawi, Temple Tree is a unique architectural villa hotel consisting of antique houses from all across Malaysia. Rooms cost from Dh350, including taxes.
Overall head-to-head
Federer 6-1 Cilic
Head-to-head at Wimbledon
Federer 1-0 Cilic
Grand Slams titles
Federer 18-1 Cilic
Best Wimbledon performance
Federer: Winner (2003, 2004, 2005, 2006, 2007, 2009, 2012)
Cilic: Final (2017*)
Common OCD symptoms and how they manifest
Checking: the obsession or thoughts focus on some harm coming from things not being as they should, which usually centre around the theme of safety. For example, the obsession is “the building will burn down”, therefore the compulsion is checking that the oven is switched off.
Contamination: the obsession is focused on the presence of germs, dirt or harmful bacteria and how this will impact the person and/or their loved ones. For example, the obsession is “the floor is dirty; me and my family will get sick and die”, the compulsion is repetitive cleaning.
Orderliness: the obsession is a fear of sitting with uncomfortable feelings, or to prevent harm coming to oneself or others. Objectively there appears to be no logical link between the obsession and compulsion. For example,” I won’t feel right if the jars aren’t lined up” or “harm will come to my family if I don’t line up all the jars”, so the compulsion is therefore lining up the jars.
Intrusive thoughts: the intrusive thought is usually highly distressing and repetitive. Common examples may include thoughts of perpetrating violence towards others, harming others, or questions over one’s character or deeds, usually in conflict with the person’s true values. An example would be: “I think I might hurt my family”, which in turn leads to the compulsion of avoiding social gatherings.
Hoarding: the intrusive thought is the overvaluing of objects or possessions, while the compulsion is stashing or hoarding these items and refusing to let them go. For example, “this newspaper may come in useful one day”, therefore, the compulsion is hoarding newspapers instead of discarding them the next day.
Source: Dr Robert Chandler, clinical psychologist at Lighthouse Arabia
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
Wallabies
Updated team: 15-Israel Folau, 14-Dane Haylett-Petty, 13-Reece Hodge, 12-Matt Toomua, 11-Marika Koroibete, 10-Kurtley Beale, 9-Will Genia, 8-Pete Samu, 7-Michael Hooper (captain), 6-Lukhan Tui, 5-Adam Coleman, 4-Rory Arnold, 3-Allan Alaalatoa, 2-Tatafu Polota-Nau, 1-Scott Sio.
Replacements: 16-Folau Faingaa, 17-Tom Robertson, 18-Taniela Tupou, 19-Izack Rodda, 20-Ned Hanigan, 21-Joe Powell, 22-Bernard Foley, 23-Jack Maddocks.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Tonight's Chat on The National
Tonight's Chat is a series of online conversations on The National. The series features a diverse range of celebrities, politicians and business leaders from around the Arab world.
Tonight’s Chat host Ricardo Karam is a renowned author and broadcaster who has previously interviewed Bill Gates, Carlos Ghosn, Andre Agassi and the late Zaha Hadid, among others.
Intellectually curious and thought-provoking, Tonight’s Chat moves the conversation forward.
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