Chilling testimony turns spotlight on crimes of honour

Shafilea Ahmed’s parents are on trial for her murder, highlighting a vicious trend of hidden violence, writes Karen Kissane in London.

Her dreams were so ordinary: to be able to wear jeans and T-shirts, to go out with a nice boy, maybe to go to university and do law. But such dreams, for girls like Shafilea Ahmed, can be deadly.
Shafilea (pronounced Shafeela) was pretty and bright and full of spirit but she died at 17, in 2003. She had gone missing from her home in Cheshire, but her Pakistani-born parents did not report her absence to police. Her younger sister Alesha says it was they who killed her – in front of their other children – to save the family honour.
A taxi driver, Iftikhar Ahmed, 52, and his wife, Farzana, 49, are now on trial for their daughter’s murder. They have pleaded not guilty and the jury is still hearing the evidence.
But the case has turned the spotlight on so-called “honour” crimes in some of Britain’s migrant communities. About a dozen women a year die in acts of revenge over breaches of “honour” that might include refusing to wear traditional clothes or accept an arranged marriage, or choosing a man of whom the family disapproves.
UK police recorded more than 2800 honour attacks in 2010, a figure that is understated because only 39 of the country’s 52 police forces revealed their numbers. Among the 12 forces able to provide comparison figures from 2009, there was an overall rise of 47 per cent in such incidents. Five hundred of the attacks were in London.
The figures were released last December by the Iranian and Kurdish Women’s Rights Organisation following a freedom-of-information request. Due to under-reporting by women, “the reality is far darker” than the numbers suggest, says its director, Diana Nammi.
She says the victims are mainly of Asian or Middle Eastern backgrounds but also include Eastern Europeans. They die, or are abused, because “it’s easier to sacrifice a son or a daughter than it is to sacrifice a society or your extended family, who you are trying to please all the time”, one young woman in a refuge recently told the BBC.
The suicide rate among south Asian women in Britain is three times the national average, thought to be the result of women taking what they see as the only way out of an intolerable situation – or being forced to kill themselves.
For Shafilea, her sister claims, death was preceded by months of abuse, including at times starvation, beatings, and threats with a knife. Alesha told the court her parents had drugged Shafilea to make her compliant about getting on a plane back to Pakistan in 2003. When there, Alesha said, “My mum told Shafilea she would be staying in Pakistan and wouldn’t be going back.”
She drank bleach so that she would not be forced into an arranged marriage, Alesha said. Shafilea was flown back to Britain for treatment and spent three months in hospital. Her parents told her to say she had drunk the bleach because she mistook it for mouthwash in the dark, but she reportedly told another patient that she had taken it to avoid marriage.
A former patient, Foisa Aslam, told the court Shafilea had said her parents had accepted a formal offer for her but “she didn’t even love the guy … she wanted to get out of there but they had taken her passport from her”.
Nammi says Britain needs a detailed strategy to deal with honour-based violence. It is more usual for domestic violence to involve only a husband or father, but honour-based violence can have wider groups of perpetrators. “Sometimes it’s not only the very close family – father, mother, brother – but members of the extended family or the wider community can be involved. Sometimes a contract killer or a bounty hunter is hired. Some families will pay other people to track them down and find where they are living, and some will pay to have them killed. That’s happened in England a few times.”
She says it will take time to help traditional elements in some communities change their thinking, and meanwhile, the government needs to establish special refuges for women fleeing honour revenge attacks. “It’s not just about domestic violence, it’s about the risk of being killed,” she says. “Refuges are crucial but in the UK many refuges have closed” because of funding cuts.
She warns that some welfare organisations make a mistake in trying to mediate between the threatened girls or women and their angry families. But some women who are forced into reconciliation find themselves taken back to their country of origin, she says.
“There are cases of girls under 14 whose families say, ‘We won’t force her into marriage’, and they sign a piece of paper saying that and then the next day the girl disappears. I always advise social services not to negotiate with the family.”
The prosecutor, Andrew Edis, QC, told the Chester Crown Court that this case had taken a long time to come to trial because Alesha, now 23, did not tell her story to police until 2010, when she snapped after being arrested for taking part in a robbery at her parents’ home.
He said the jury must decide whether she was finally freeing herself of a dreadful family secret that had haunted her since she was 15, as she claimed – she told the court she had feared suffering Shafilea’s alleged fate if she spoke out – or making up “a wicked lie”.
But he questioned why she would make up such a story. Alesha claimed Shafilea died after a row that began over the fact she had worn a T-shirt to work. Her parents suffocated her by stuffing a carrier bag into her mouth and holding their hands over her nose and mouth so that she couldn’t breathe, Alesha said. She claimed she later saw her mother with black bin bags and wide brown tape and saw her father carrying a plastic-wrapped burden out to the car.
More than four months later, Shafilea’s badly decomposed remains were discovered near a river in Cumbria.
Alesha told the court her loyalty to her parents began to unravel when she went to university and found herself wanting the same freedoms her sister wanted – but being told the same things by her parents, who wanted her to go back to Pakistan and find a husband.
“That is when I saw that it is not normal and that what happened to my sister was wrong. When it’s your own parents, you don’t see things like that because you love them.”First published in The Sydney Morning Herald.

Mogul’s piece of humble pie

Rupert Murdoch’s grilling has a nation transfixed, Karen Kissane reports from London.

It is not often Rupert Murdoch is backed into a corner, but it happened this week at the Leveson inquiry into press standards.
He was being questioned about a story in the News of the World, the Sunday tabloid he closed last year over the phone-hacking scandal. The then-formula one chief Max Mosley once sued the paper over an article that claimed he had taken part in a Nazi-themed orgy. Mosley contended that the orgy had no Nazi theme. In 2008 the High Court ruled he was right and awarded him damages.
Murdoch was questioned about a related issue, the paper’s posting on its website of a video of the sexual encounter. In his judgment of the case, Justice Eady wrote that the newspaper had offered to pixilate the face of one of the women in the video, and to pay her money, if she would give an interview about the incident. She was told that if she refused, her privacy would not be protected. Justice Eady said this amounted to blackmail.
Did Murdoch think his journalists had committed blackmail?
Murdoch replied, “A journalist doing a favour for someone in return for a favour back is pretty much everyday practice.”
Justice Brian Leveson pressed him, saying he found it disturbing that a woman whose actions did not touch on the public interest would be treated that way.
Murdoch insisted, “It’s a common thing in life, not just in journalism, for people to say, ‘You scratch my back and I will scratch your back … “‘
Leveson asked him to read the Mosley judgment and to make a submission about his view on the blackmail claim. Murdoch agreed.
And then, to double his trouble, lead counsel Robert Jay, QC, took the opening to ask Murdoch whether back-scratching was a part of his dealings with politicians. But on this issue of political influence Murdoch was adamant that his hands were clean, a stance he upheld all through his day and a half of questioning: “I don’t ask any politician to scratch my back.” He had never asked a prime minister for anything, he maintained.
Jay put it to him that he would never have been so “cack-handed” as to ask directly for anything; that perhaps politicians worked out what he wanted and gave it to him.
“Whether Rupert ever asked for anything or got anything is only one question,” the media analyst Steve Hewlett later told the BBC. He said Jay did “out” Murdoch on a number of issues: among them, influencing Tony Blair over the euro and buying The Times and The Sunday Times without the sale being referred to Britain’s Competition Commission.
“Once politicians believe he is essential to electability, and that’s been the case since [prime minister Margaret] Thatcher, the process is corrupted,” Hewlett said. “It’s not only what did they do in return but what didn’t they do for fear of Rupert Murdoch and his newspapers.”
Hewlett argued that the issue was not Murdoch lobbying for his commercial interests, or allowing his political interests to shape the content of his newspapers; all proprietors did that. “The problem was that he was 40 per cent of the market and way, way over-mighty. There wasn’t anything of significance that didn’t involve, ‘What did Rupert make of this?’ … for the last 30 years.”
But the appearances of James and Rupert Murdoch this week are about much more than an analysis of where the British media have gone wrong. This was the second time that Murdoch, one of the world’s richest and most powerful men, agreed to be publicly interrogated. The first time was when he appeared last year before a committee of British MPs over phone-hacking.
The Leveson inquiry asked him about phone-hacking, too, but its main focus was his relationships with politicians. He would have agreed to appear at least partly because it was in the interests of his company, News Corp, that he eat this particular humble pie with a semblance of good grace.
Because underneath all the claims and counter-claims about hacking and bribery, cover-ups and failures in corporate governance, simmers a potentially deadly question: are the Murdochs and their companies fit and proper to be holding the positions they do?
The answer to this could prove expensive, on both sides of the Atlantic.
The same day Rupert Murdoch gave evidence, news broke that Britain’s media regulator, Ofcom, had asked News Group newspapers for more documents disclosed in the civil cases related to phone-hacking. This was the first confirmation that the malpractices at News of the World were important to Ofcom’s investigation into whether BSkyB is fit and proper to hold a broadcasting licence.
Worst-case scenario for the Murdochs: News Corp could be forced to reduce its 39 per cent share in BSkyB so that it would no longer be seen as having a material influence over the broadcaster.
Ofcom might also be watching with interest the 46 arrests from the two police investigations related to News-related scandals (one into phone-hacking and one into bribery of officials), as well as the work of the parliamentary select committee on the media, which is due to release its report into the phone-hacking scandal next week.
The British scandals are reverberating in the US, too. Last year, the FBI launched an investigation into News Corp after a report that employees might have attempted to hack phone conversations and voicemails of survivors of the September 11 attacks.
Separately, US authorities are considering action against News Corp under the Foreign Corrupt Practices Act, legislation that allows prosecution of US firms which might have bribed foreign officials. This would relate to the claims by British police that The Sun newspaper had “a culture of illegal payments” to “a network of corrupted officials” – including police.
Worst-case scenario for the Murdochs: a US court case, with a guilty verdict leading to hundreds of millions of dollars in fines.
James Murdoch has claimed he knew nothing of the extent of the phone-hacking scandal at the time the company denied it went beyond a single reporter. This week, Rupert Murdoch admitted there had been a cover-up but pointed the finger at an editor, believed to be Colin Myler, and a “smart lawyer”, believed to be News International’s former head of legal affairs, Tom Crone.
A furious Crone denied this charge as a “shameful lie”. He pointed out it was “perhaps no coincidence” that the two people Murdoch named as involved in a cover-up also happened to be the same two people who had said his son’s evidence to the parliamentary select committee last year was inaccurate.
Crone and Myler told the committee they had warned James of evidence that hacking was widespread, and he had understood what it meant. James is adamant he was not told.
Meanwhile, Britain is transfixed by the political fallout from this week’s hearings. During James’s evidence it was revealed the special adviser to the Culture Secretary, Jeremy Hunt, kept the Murdochs briefed daily on Hunt’s thinking about last year’s News Corp bid for a full takeover of BSkyB. This continued during the months Hunt was meant to be acting impartially, in a quasi-judicial role, supervising the process.
The special adviser, Adam Smith, has now walked the plank, apologising for having “gone too far” in briefing News Corp, but Labour is baying for the minister’s blood.
The Opposition Leader, Ed Miliband, said the idea Smith had acted as a “lone wolf” beggared belief. The phone-hacking Hydra continues to grow more heads.

First published in The Sydney Morning Herald.

Fit for a princess

With her cool elegance,  Grace Kelly epitomised both the glamour of Hollywood and allure of European royalty. An icon of the 20th century, her treasured clothes and accessories that embodied the look of the times have long been safeguarded at her palace in Monaco. Now they are winging their way here.

LIFE AND STYLE COVER STORY

MONTE CARLO

IT ALMOST didn’t happen, that first meeting between the actor Grace Kelly and the man who was to turn her life into a fairytale, Prince Rainier of Monaco. It had been set up by a French magazine as a photo opportunity during the 1955 Cannes Film Festival.
First, Kelly’s schedule was so frantic that she was tempted to cancel. Then her hotel suffered a power cut so she could not dry her hair or iron a frock.
The queen of Hollywood improvised. She pulled her hair back and wore her least-wrinkled outfit, a lush floral silk taffeta made from a McCall’s dress pattern that was quite different from her usual sleek look.
That evening she told Olivia de Havilland that Rainier was “charming, a very charming man indeed”. Her current love was consigned to oblivion. Within a year, aged only 26, she had had “the wedding of the century” and was elevated to Her Serene Highness — a title well suited to her trademark cool loveliness.
Royalty had long been her aim. As a child growing up in an Irish Catholic family in Philadelphia, she once told her sister Peggy, “I’m going to be a princess.”
Even as a child, she had been unruffled by life’s ups and downs. Her other sister, Lizanne, once locked her in a cupboard. Kelly did not cry or bang to get out. She sat inside and contentedly played with her dolls for hours. “She seemed to have been born with a serenity the rest of us didn’t have,” Lizanne said years later.
That self-possession was part of Kelly’s allure. Add regal bearing, deep blue eyes, a classically beautiful face the camera caressed and a distant gaze — not so much superior as unfocused, her short-sightedness corrected by thick horn-rimmed glasses in private — and you have the basis of the Kelly look that would so entrance a generation of filmgoers, photographers and directors, including Alfred Hitchcock.
He used her in three of his films — Dial M for Murder, Rear Window and To Catch a Thief — and said she had “sexual elegance” and resembled “a snow-covered volcano”: cool on the outside but with the suggestion of raging hot torrents within. It was a good analogy, judging by Kelly’s own remarks on her sexuality to her friend and biographer, Gwen Robins: “She just adored sex. She made no bones about it. We were lying on the bed one day and I said something about sex and she said, ‘It’s heaven.”‘ She told someone else it “put lights” in her eyes.
But Kelly understood that mystery was needed for mystique. She was discreet and tenaciously private about personal matters. Her active love life was a secret until after her death. It was customary in those days for the studios to release the body measurements of their stars; Kelly refused.
She carefully cultivated a picture that smoothed over any rough edges in her history. A book put out by the Grimaldi Forum in Monaco quotes her as saying that her family always trusted her choices and supported her career: “There was no such thing as a bad profession for them.”
Not so, says one of her bridesmaids, who later wrote a book on Kelly that said her father, Jack, thought acting was “a slim cut above street-walking”.
This already delectable package had to be fashionably packaged by Hollywood and it is the clothes that were created for her films and her public appearances that really launched the signature Kelly style. Left to her own devices when young, she dressed like the preppy private schoolgirl she had been: wool skirts, cashmere cardigans, pearls and little heels (at more than 1.65 metres, she was considered tall for an actress).
She worked out when modelling early in her 20s that she looked best with her hair pulled back off her square face and stuck firmly to that policy thereafter.
She did not flaunt. Even as a star, she would wear figure-hugging evening frocks but avoided overly revealing clothes; her breasts were always discreetly covered and she disliked short skirts when they later came into vogue (“After all, who has pretty knees?” she asked.)
She became known for classic understatement and clean lines. The waists were cinched, the skirts often full, the shoulders either bare or wispy with chiffon. Floaty fabrics conjured up feminine archetypes: the goddess, the sprite, the dancer. Her look was more adult than Audrey Hepburn’s gamine but not as sultry as Sophia Loren’s highlighting of Mediterranean curves.
Writing in Vanity Fair, Laura Jacobs says, “In To Catch a Thief and High Society, references abound to both classical draping and classical dance … Grace’s gowns are columnar, with waterfall pleats and cascades fluting, sheer trains flowing down from the back (where wings would be, if she had them) and sheer scarves like soft breezes around her neck …
“Grace’s day dresses have fitted bodices and skirts blossoming from the waist — a very clever fusion of the ballerina’s tutu with the American shirtwaist and a shape that allowed her to move freely (as she did in the sensational flowered shirtwaist of Rear Window, in which she climbed a fire escape). As for colour, Grace was given her own Apollonian palette. Wheat-field and buttercup yellows, azure and cerulean blues, seashell pink and angel-skin coral, Sun King gold and Olympus white — no one wore white like Grace Kelly.”
Except, perhaps, Marilyn Monroe in the iconic image with white sunray pleats billowing over a New York subway grating.
Kelly’s clothes from both her Hollywood and her Monaco days now reside in a small, fluorescent-lit basement room in the bowels of the palace on the rock in Monte Carlo that has been inherited by her son, Prince Albert, and his new wife with the uncertain smile, Princess Charlene.
Rack upon colourful rack of haute couture and home-made ball gowns, suits and dresses stand covered in white dustcloths, the air around them dehumidified and the temperature chilled to help preserve them. Shoes, hats, gloves and bags are wrapped in tissue. Everything is tagged with information about its designer, the year of origin and the major occasions upon which it was worn.
While it is clear the 1970s were unkind even to princesses — jewelled caftans could work in no other era and it could be argued they didn’t work even then — prowling the racks cannot help but produce crows of delight. Here, the pale blue frock in which she was photographed for High Society with Bing Crosby on one arm and Frank Sinatra on the other; there, a magnificent, 19th-century-style, full-skirted black net gown with gold embroidery she wore to a ball themed “1900”.
Many of the most famous items have been touring the world as part of an exhibition on Kelly’s life that is now in Toronto. An Australian version is due to be opened by Princess Charlene in Bendigo next month.
The exhibits will include a copy of her wedding dress, which had a 21-inch (53-centimetre) waist, and the original of the beautifully cut navy coat and cream shift she wore when landing in Monaco after crossing the sea with 66 family and friends and a media posse for her much-trumpeted wedding of the century (“the carnival of the century,” she dubbed it wryly).
The original wedding dress is now too fragile to travel. It was styled by Hollywood designer Helen Rose, who had fashioned her delicious frocks in the musical comedy High Society, and took 35 people six weeks to make. MGM had promised to let Kelly have the High Society wardrobe if she let the studio provide the wedding dress and film the ceremony.
It was the William and Kate wedding of its time, with 1800 journalists accredited to cover it and a live broadcast watched by 30 million people in Europe.
The Duchess of Cambridge last year paid homage to Kelly’s frock with her own wedding dress, which was also tightly waisted with a similar lace bodice and full skirt.
Kelly became pregnant with her first child, Caroline, on the honeymoon and that led to another fashion classic. She bought a large handbag from Hermes that she carried in front of her bump, pregnant bellies not yet having become a fashion accessory in their own right.
And thus “the Kelly bag”, which has been copied and tweaked in many ways since, was created.
The original, in tan leather, will be part of the Bendigo exhibition. So will a small, prettily worked tapestry bag that Kelly carried the night she won an Academy Award for The Country Girl in 1955 and to the official “reception of wedding gifts” after her marriage.
The basement collection is presided over by Kelly’s former palace wardrobe mistress, Maryel Girardin. She worked for the Monaco palace for 50 years, 25 of them with Kelly. She was the princess’s embroiderer and linen supervisor overseeing a staff of 30 and later worked as her seamstress, too.
Kelly was casual and spontaneous in her everyday life, Girardin says. She would roll up bare of make-up, in everyday clothes, carrying a Vogue pattern she wanted made up or asking for a special little something from Girardin’s nimble fingers, such as an embroidered apron to be part of a Monagasque national dress.
One of the special requests was a full-length coat in red and gold brocade, which Girardin made up for her from a sketch and from fabric that Kelly had already found. “She always knew exactly what she wanted,” Girardin says. “She was always very certain.”
Girardin had come to France at the age of 10 from Vietnam, orphaned by war and raised by nuns in a religious institution. She dislikes talking about that. “I don’t look back,” she says briefly. Thanks to Kelly, she says, she has had a happy life and seen many marvellous things, such as the glittering banquets laid out for special functions. She helped raise the princess’s children; Kelly wanted her in the nursery, too.
She performs a different kind of labour of love now. It was Girardin who, on Prince Rainier’s orders, gathered all Kelly’s clothes together after her death. She helps curators assemble and display them for exhibitions and she made Kelly’s replica wedding dress. Photographing clothes for The Saturday Age, Girardin knows just how to make them sit well with the help of a pin here or a judiciously placed fistful of tissue paper there. Some are wearing thin with age or developing age-related stains and Girardin has a rescue plan for each one.
After her marriage Kelly wore more haute couture, with Marc Bohan of Christian Dior a favourite. Two of her Bohan evening dresses cannot travel, however, as they are trimmed with ostrich feathers — they might be fit for a princess but they won’t pass modern quarantine rules.
Kelly always said she was frugal with her clothes and rarely threw any out, preferring to re-wear her old favourites. Rainier, on the other hand, liked to go shopping with her and sometimes overruled her thriftiness. She used to say he had excellent taste and instinctively liked the most expensive things, “a delightful quality in a man”.
She had long known she did not want to grow old in Hollywood, which she said was a “town without pity” where only success mattered. She had also seen what life was like for fading stars.
“I get up at seven for the make-up, Rita Hayworth at six, Joan Crawford and Bette Davis at five. I don’t want to know the time when I’ll have to come to the studio even earlier,” she said.
But she had not initially thought that her marriage would burn the bridge to Hollywood. She had thought before she married that perhaps she might make more films but somehow it never happened; she was busy with the children and her royal role, the right script did not come at the right time and somehow the possibility floated away.
But royal life brought its own problems. It sounds like there were times she felt like the princess in the tower. Vanity Fair reported that she had tears in her eyes when telling a friend, producer John Foreman, “I know where I am going to be every single day for the rest of my life.”
She had her own interests, though. She revived the glittering grand balls of Monaco’s past, inviting aristocratic as well as Hollywood royalty. Palace staff knew never to throw out telephone directories; she kept them to press flowers, which she arranged into artwork. She made home movies and often inserted herself as a cameo in a final frame — a homage to her old friend Hitch and to her old life, perhaps.
It almost didn’t happen, that plunge off the cliff on the Cote D’Azur that killed her.
Like her meeting with Rainier, Kelly’s exit from the stage of life was linked to fashion. She had filled the back seat of her car with clothes she was taking to be altered for the coming season.
She didn’t want them crushed, so she brushed aside her normal chauffeur to take the wheel herself, with her younger daughter Stephanie at her side.
Driving along the very road made famous in To Catch a Thief, she is said to have suffered a minor stroke that made her lose control of the car. In September 1982, aged only 52, the queen of style and princess of Monaco was dead.
Girardin’s face crumples even today when she is asked about it. “She was so beautiful,” she says through a translator, briefly covering her face with her hands. “Her eyes were sublime. I miss her very much. Twenty-five years [the period they worked together] is a long time.” Kelly once said she wanted to be remembered as a kind and loving person. In Girardin, she gets her wish.
■The exhibition Grace Kelly: Style Icon will be opened by Princess Charlene of Monaco on March 10 and will run from March 11 to June 17 at the Bendigo Art Gallery.
Karen Kissane travelled to Monte Carlo as a guest of Monaco Tourism. 

First published in The Age’s Life and Style Magazine.

Nation that went down with a ship

Italians fear being lumped with the Costa Concordia’s skipper.

GIGLIO, ITALY

Even Hollywood at its cheesiest would be wary of cramming such a clutch of omens into one script.
When the cruise liner Costa Concordia was launched in 2006, the champagne bottle failed to break against its side, causing gasps of dismay from onlookers.
When its captain, Francesco Schettino, was interviewed a year ago, he said, “I wouldn’t like to be in the role of the captain of the Titanic.” Last week, its passengers included Valentina Capuano, whose grandmother survived the sinking of the Titanic in 1912 but whose great-uncle, a waiter on the ship, did not.
When the Costa Concordia hit rocks and foundered last Friday night, it was dinner time and the band was playing the love song from the film Titanic.
Within an hour, disaster movie scenes were playing out in the dark winter waters near the tiny port of the island of Giglio, off the coast of Tuscany in Italy’s north-west.
Francis Servel, a 71-year-old Frenchman, gave his wife his lifejacket because she could not swim. He jumped into the water and cried out to encourage her in. Nicole Servel, 61, managed to get to shore but her husband was swept away and has not been found. “The last thing I heard him say was that I would be fine. Then I never saw him again,” she says. “I am angry because there was no boat for us and there was no one to save my husband. I owe my life to him.”
Another Frenchwoman, Beatrice Micheaud, 58, and her 61-year-old husband, clung to the side of a life-raft for more than an hour. “We … kept lifting our heads to shout to ask to be taken on board but the people in the raft didn’t hear us, or didn’t want to hear us. We were exhausted.”
The long-haired drummer in the ship’s band, Giuseppe Girolamo, is among the 21 still missing (11 are confirmed dead). Girolamo had a place in one of the lifeboats but gave it up to a child.
It is not the stories of courage, selflessness and tenacity that have captured Italy’s imagination, however, but the actions – and inaction – of the man at the helm: Francesco Schettino, apparently a captain of skill but a deeply flawed personality now undone by his own hubris. The over-reaching Icarus flew too close to the sun; the arrogant Schettino, convinced of his superlative navigational ability, sailed too close to the rocks.
For both, the crash back to reality was devastating. Schettino has become a national figure of shame not just for having crashed the ship as part of an ego trip but for allegedly having committed the captain’s mortal sin: abandoning his ship and escaping to safety in a lifeboat while hundreds of passengers were still struggling on board.
A coast guard commander, frustrated when Schettino resisted his orders to return to the ship and oversee evacuation, was recorded roaring at Schettino, “Get on board, for f—‘s sake!” He demanded that Schettino tell him how many women and children needed help. Within hours of that exchange being broadcast, Italians were wearing mocking T-shirts with “Vada a bordo, cazzo!”, and the phrase became Twitter’s top-trending Italian hashtag.
Newspaper commentators were quick to pounce on the damage to the national standing — and the allegory of the shipwreck with Italy’s broader troubles as it comes close to the reef of the euro zone crisis, among other problems.
“We had just come out of the tunnel of bunga bunga,” Caterina Soffici wrote in a blog for the left-leaning Il Fatto Quotidiano. “We were just drawing that little relieved breath that would enable us to toil again up the hill to international credibility. But [now] … we’ve gone straight into the Titanic nightmare [and] Italy is once again the laughing stock of foreign newspapers.”
Writing for Silvio Berlusconi’s paper Il Giornale, Cristiano Gatti cringed at the world taking delight in an image of “the same old rascally Italians: those unreliable cowards who turn and run in war and flee like rabbits from the ship, even if they are in command”.
But Gatti and others pointed out that the story did have heroes. Schettino might have been in a lifeboat with his first and second officers at the height of the crisis but an off-duty ship’s captain stayed and managed the evacuation, along with Schettino’s junior officers.
But the man who has come to stand for everything Schettino failed to be that night is actually the coastguard commander, Gregorio de Falco, whose enraged demands that Schettino live up to his responsibilities have become legend.
Schettino, in his early 50s, is a handsome man with a small pot belly, a deep tan, dark hair and blue eyes with lashes that curl.
He comes from a family of several generations of seafarers and began his career on ferry boats before becoming a captain in 2006. He was a controlling, perhaps even narcissistic commander, seen to have had a stellar rise in the cruise industry.
One of the officers on board the Costa Concordia, Martino Pellegrino, told La Repubblica newspaper: “If I had to make a comparison, we got the impression that he would drive a bus like a Ferrari.” Pellegrino also said Schettino was an “authoritarian” who was often “inflexible”.
One of his former commanders, Mario Palombo, told reporters: “I’ve always had my reservations about Schettino. It’s true, he was my second-in-command, but he was too exuberant. A daredevil. More than once I had to put him in his place.”
On the night of the shipwreck, Schettino told an investigating magistrate this week, he took the liner near Giglio’s rocky coast because he wanted to give a “salute” to Palombo, who lived on the island. Cocky, he navigated without using charts.
“It’s true that the salute was for Commodore Mario Palombo, with whom I was on the telephone … I made a mistake in the approach.
“I was navigating by sight because I knew the depths well and I had done this manoeuvre three or four times. But this time I ordered the turn too late and I ended up in water that was too shallow,” he said.
About 9.30pm, the ship hit a rocky outlet called Le Scole, which tore open a gash in the port side of the hull. Schettino said: “I don’t know why it happened. I was a victim of my instincts.”
Actually, the 11 dead and 21 missing were the real victims of his instincts. And his instincts, once the ship struck rocks with a shuddering groan, remained poor.
His initial reaction seems to have been denial. The coastguard, alerted by a passenger’s mobile phone call, contacted him twice to ask if the ship was all right. Twice, he denied there was a serious problem.
On the decks below, there was panic. Cabins were plunged into darkness. Drinks slid off tables, plates smashed. An English crew member, Rose Metcalf, said: “It was just terrifying … people were white, people were crying, screaming.” Video footage shows children shrieking “mummy!” and “daddy!”
But Schettino announced an electrical fault and said it was not serious. James Thomas, who had been working as an entertainer on the ship, said the staff then heard two short blasts followed by alternate tones, “which means there is a leak on board and so the crew were divided, very much so. A lot of people said, ‘No, just tell everyone to stay calm, that’s what we’ve been told to say.’ But then other people took the initiative and said, ‘OK, let’s tell everyone to stay calm but hand over lifejackets.”‘
It was only at 10.30pm that a reluctant Schettino, under pressure from the coastguard, finally sent a mayday. The vessel was then listing 20 degrees.
It was another 20 minutes before he gave the order to abandon ship, but it seems that some of his junior officers defied his inaction and began lowering boats before he made the decision. The only passengers who recognised the abandon-ship signal — seven blasts of the horn — were those who had sailed on earlier cruises, as this shipload had not had its emergency drill.
Passengers said there was almost no help from crew with the evacuation. Metcalf recalled: “We were literally throwing each other. We were creating human chains to try and pass people over gaps that, if they dropped down, there was no recovery from. What was vertical was becoming horizontal.”
Discipline broke down among the crew and many passengers reported that it was waiters, chefs and entertainers who helped with the evacuation. Englishwoman Sandra Rogers, 62, later told the Daily Mail: “There was no ‘women and children first’ policy. There were big men, crew members, pushing past us to get into the lifeboats. It was disgusting.”
She said the men had knocked her and her two seven-year-old granddaughters. “And when we finally got into a lifeboat, people, grown men, were trying to jump into the boat. I thought, ‘If they land in here, we are going to capsize.”‘
The captain was in a lifeboat himself by 11.40pm, although the last passengers were not evacuated until 3am. He claims this was an accident.
During questioning this week, Schettino is reported to have said: “The passengers were pouring on to the decks, taking the lifeboats by assault. I didn’t even have a lifejacket because I had given it to one of the passengers. I was trying to get people to get into the boats in an orderly fashion. Suddenly, since the ship was at a 60 to 70 degree angle, I tripped and I ended up in one of the boats.”
The judge questioning him, Valeria Montesarchio, said Schettino had not made “any serious attempt” to return to the vessel or “even close to it”.
This was despite the furious bollocking he received from the coast-guard commander, Gregorio de Falco, who was appalled when Schettino told him he was in a lifeboat while hundreds of people were still aboard. De Falco ordered him back to the bridge, saying, “Captain. This is an order. Now I am in command. You have declared the abandoning of a ship and are going to co-ordinate the rescue from the bridge. What do you want to do? Go home?”
When Schettino protested that the ship was tilted, de Falco said: “There are people who are coming down the ladder on the bow. Go back in the opposite direction, get back on the ship, and tell me how many people there are and what they have on board. Clear? Tell me if there are children, women and what kind of help they need. And you tell me the number of each of these categories. Is that clear?
“Look, Schettino, perhaps you have saved yourself from the sea but I will make you look very bad. I will make you pay for this. Dammit!”
But his lawyer claimed Schettino “saved thousands” with his final manoeuvre, bringing the ship closer to shore to make evacuation easier, and that getting back on board was impossible. “You try and see if you could get back on a vessel in that condition,” Bruno Leporatti said.
“You need a helicopter.”
It was Roberto Bosio, the off-duty captain from a sister ship travelling on the liner as a passenger, who stayed behind to man the bridge after it was abandoned. Two other Italian officers also stayed to try to bring order to the chaos.
Afterwards, Bosio was scathing about Schettino: “Only a disgraceful man would have left all those passengers on board. It was the most horrible experience of my life, a tragedy, a heartache that I will carry with me forever … don’t call me a hero. I and the others with me just did our duty. We looked each other in the eyes for a second and then we just got on with it.”
The next day, Schettino left the harbour master’s office at 11.30am. He took a taxi a short distance to a Giglio hotel. Driver Ottavio Brizzi told reporters: “He didn’t say very much apart from asking me where he could buy some dry socks. He looked very cold and scared — he looked like a beaten dog.”
Schettino has been savaged since. He has been released from jail but is under house arrest and faces two police inquiries: one into his changing the route and one into the evacuation of the ship. He could receive up to 12 years in jail if convicted of manslaughter and abandoning his ship before his passengers did.
La Stampa newspaper said in an editorial Italy had had only two months to restore its international reputation since technocrat Mario Monti replaced the buffoonery of former prime minister Silvio Berlusconi: “Two months to forget the worst of ourselves: the superficiality, the carelessness, the pomposity, the abdication of responsibility.
“And then, with a single nudge of the rudder, Captain Schettino has sunk our international reputation, along with his ship.
“… We are looking at a type of Italian that we cannot pretend not to recognise: more full of himself than sure of himself. One who does stupid things for the sake of having fun and seeks to hide them with the mantra, ‘everything’s OK, no problem’.”
Schettino’s wife and family have spoken out in his defence, and they were joined by members of his local town, including his priest, Don Gennaro Starita, who told parishioners he was “really angry” about the way Schettino had been portrayed.
“He has been pilloried by the media,” he said. “Humanly speaking, they have killed him. It’s a shame. There are so many dead already, why do we want another?”
The debate is now moving to how to deal with the vast wreckage of what is tipped to be the most expensive insured disaster in maritime history.
Schettino is likely to find himself wrong on yet one more point. In the newspaper interview he gave last year, he was asked about what impact the sinking of the Titanic had on people’s perceptions of ship safety at the time. He said: “Luckily, people quickly forget tragedies.”

First published in the Sydney Morning Herald.

D-days for the Europe experiment

LONDON

It wasn’t supposed to be like this. The euro was supposed to make trade quick and easy. The new, integrated Europe was supposed to contain Germany and protect France and cement the place of the old world in international affairs. And globalisation – well, that was supposed to open up markets and make everyone richer.
But the 10th birthday of the euro passed uncelebrated on January 1, like the birthday of a disgraced relative who has brought shame on the family name. The leaders of the European Union spent much of last year at one another’s throats behind closed doors and smiling frostily in public, barely keeping up appearances. And globalisation, some now say, has become Europe’s economic doomsday machine.
If last year was rough, with no fewer than 15 failed summits, each falsely trumpeted as the saviour of the euro zone, 2012 is destined to be even tougher. Take it from the leaders.
In their New Year addresses, the French President, Nicolas Sarkozy, said Europe was “without doubt [in] the gravest [crisis] since the second world war”, and the German Chancellor, Angela Merkel, said 2012 “would no doubt be more difficult than 2011”.
The managing director of the International Monetary Fund, Christine Lagarde, went further. She warned that if Europe failed to sort out its debt crisis, it could trigger “retraction, rising protectionism and isolation. This is exactly the description of what happened in the 1930s and what followed is not something we are looking forward to.”
Depression and mass unemployment? A spike in fascism and race-hate? Could it be that the rampant looting and arson of London’s August riots, and the months of street protests in Spain and Greece, are but a taste of what is to come?
Because the truth is Europe, including Britain, might not be suffering under temporary austerity measures. Prolonged economic decline may be the new reality as wealth and power shifts from the old world to the emerging economies of Asia.
Questions are being asked about how Europe’s democracies can thrive – or even survive – when its governments cannot hold out to their people the promise of a return to the prosperity of the past. The same goes for the European Union; support for the “European project” is at risk of falling at the very time its leaders most need to push for greater unity.
Sixteen million people in the euro zone are unemployed and voters are becoming angry and disaffected as austerity bites. In Greece, poor people who are diabetics cannot get insulin, cancer sufferers are missing out on drugs and even paracetamol is in short supply. The Greek Orthodox church this week reported cases of parents abandoning their children into care because they could no longer afford to support them.
In Britain, 2.85 million unemployed means the welfare bill has rocketed and austerity is expected to last at least a decade. The Coalition government now wants to means-test benefits for people with cancer and young people with disabilities – moves the Labour opposition is resisting, arguing people made payments to support those benefit schemes and should not lose them when they are most in need.
Schools, hospitals, police, defence and councils are being slashed. Anxiety is morphing into long-term pessimism: almost two-thirds of Britons believe this generation of children will have a lower standard of living than their parents.
The British are known for their stoicism in the face of hardship but this is not like World War II, when everyone was in it together. In Britain, as across much of Europe, there is resentment over the rise in inequality. For a family with three children earning £35,000 ($52,000), with both parents working, real household income has fallen by £3150 compared with 2010-11.
But, as ordinary workers see the pension age extended to 67, jobs disappear and workplace rights eroded, an estimated 2800 bankers in London are each earning more than £1 million a year.
For some, pessimism has spiralled into utter despair. Across Europe, the number of people committing suicide has jumped. Figures published in The Lancet show the British suicide rate increased 8 per cent between 2007 and 2009. The Greek Parliament reported its national suicide rate rose by 25 per cent in 2010.
Stephen Platt, a professor at Edinburgh University who has been studying suicide behaviour for 30 years, told The Guardian he fears a decade of unusually high suicide rates. “If you look at the research literature about suicide and economic recession, it’s pretty clear that there is a relationship,” he says. “The idea of a lost decade is quite possible.”
The West launched globalisation as a way to open markets and increase competitiveness – and it did both. But what was perhaps not so well foreseen was the degree to which capital and manufacturing jobs would move to countries with cheap labour. As billions of low-paid workers have been absorbed into the world economy, and productivity has risen due to technology, jobs have stagnated in Europe. Asia makes, and is booming; Europe borrowed, in order to consume, and is now going bust.
The American political scientist Francis Fukuyama questions whether democracy can survive the resulting decline of the middle class. Writing in this month’s Foreign Affairs magazine, he argues the lightly regulated form of globalised capitalism has created new wealth and rising middle classes, with democracy in their wake, all over the developing world. But in the West, he says, it is eroding the middle-class social base on which liberal democracies rest.
In the same magazine, the professor of international affairs at Georgetown University, Charles Kupchan, argues globalisation is producing a widening gap between what electorates are asking of their governments and what the governments are able to deliver. Voters want them to respond to the fall in living standards and growing inequality, he says: “Globalisation has handsomely rewarded the winners but left losers behind.”
But he points out democracies have less control over outcomes in a globalised world. Traditionally, countries in economic trouble devalue their currencies to make their exports more competitive. The 27 nations of the euro zone, though, cannot do this individually; their currency is shared, and the euro’s settings are fixed by the European Central Bank.
So the only answer to date from Europe’s leaders has been to cut back and back, creating an age of austerity with no end in sight. As markets and voters watched in dismay last year’s agonised, ham-fisted talks over saving the euro, the standing of European institutions fell.
In Britain, pressure is rising on the Conservative Prime Minister, David Cameron, to leave the union, with half the nation’s voters and many of his own MPs wanting out.
There are now openly Eurosceptic parties in Finland, France and the Netherlands, and many voters perceive European institutions as foreign rather than shared. Their disaffection could fuel a retreat to isolationism and nationalism, which might be only a step away from xenophobia.
Kupchan says generational change is also taking a toll of popular support for European integration: “Europeans with memories of World War II see the EU as Europe’s escape route from its bloody past. But younger Europeans have no past from which to flee … current leaders and electorates tend to assess the EU through a cold – and often negative – valuation of costs and benefits.”
It is probably not in voting booths that Europe’s future will be decided, but in financial markets. It is not political analysts but economists who are being asked to cast the runes on the odds of the EU surviving in its present form.
Professor Douglas McWilliams, chief executive of Britain’s Centre for Economics and Business Research, earlier this month forecast a 60 per cent probability the euro zone will start disintegrating this year and a 99 per cent chance it will collapse entirely within the next decade. A BBC poll of leading economists put the chances of a break-up at between 30 and 40 per cent.
Any fracture would probably begin with the exit of Greece, which would come suddenly and without fanfare in order to prevent a run on its banks. Once Greece was gone, lairy investors would turn a harsh eye on Italy, which is also carrying high debt. If they refused credit to Italy and the huge Italian economy collapsed, the European Union in its present form would fall. The result: currency chaos and massive unemployment, possibly a depression. That kind of suffering risks resurrecting Europe’s old bogy, race.
Toughing it out with the EU will also be hard. Europe’s banks are suspected to be carrying large amounts of toxic debt. French and German banks might need to be bailed out to compensate for write-downs on sovereign debt, or even nationalised, as happened in Ireland. Either way, money will be tight for a very long time.
The architects of the EU always envisaged there would be crises over the euro and thought the crises would impel closer integration. The union’s true believers insist that is what happening here – if Sarkozy and Merkel can pull it off.
But Merkel is already hamstrung by domestic politics, with Germans furious at bankrolling bailouts for their neighbours, and Sarkozy is facing an election this year, so he must also have more of a weather eye out for local politics than usual. Already it is proving difficult to wrangle the rest of Europe into line, with Hungary and the Czech Republic warning they will join no new deal that means losing control of their tax policies.
Through that sliding door to an alternative reality – one in which the EU pulls closer over joint taxes and spending, which would stabilise the euro – we might one day see a “United States of Europe”. But right now, no one is offering odds on that happening.

First published in the Sydney Morning Herald.

Hopes for an East End on the mend

FUTURE LONDON – Life has imitated art. The postcode for the new area is E20, the same one scriptwriters created for the TV soap EastEnders.’

ON A sunny Saturday afternoon in an east London high street, a voice wafts over the shoppers’ bustle. A pleasant cockney tenor is singing, at the top of his lungs, “It won’t be a stylish marriage, we can’t afford a carriage . . .”
The serenade is coming from a young man on a bicycle. He is dressed in a grey suit with a red carnation in his buttonhole, and his legs are pedalling furiously. In front of him, in a brown box on wheels propelled by his bike, sits his Daisy. She is fully frocked: white bustier wedding dress, bouquet, wisps of baby’s breath in her hair. She holds her hand to her face, blushing and laughing, torn between embarrassment and delight.
The moment is an ode to cockney joy — albeit in gentrifying Islington, where the middle-class has encroached upon an old working-class suburb. Even so, the flashing vignette captures what are seen as the traditional strengths of the inhabitants of the East End, London’s struggle-town: resilience, inventiveness and good-humoured cheek in the face of hardship.
That airbrushed view of the East End — the good hearts and grittiness of the battlers in the 1967 film To Sir with Love, or the strong group loyalties in the long-running soap EastEnders — represents the subculture of a predominantly white cockney enclave existing now only in pockets. Today the people of the East End are among Britain’s most diverse, with 70 per cent of its residents coming from non-English backgrounds. Traces of the cockney sing-song are mostly merged with lilting Caribbean rhythms or clipped Bengali vowels — or, more recently, the accents of migrants from the Horn of Africa. But while different groups have come and gone, over hundreds of years one thing about the East End has never changed: it has always been a sinkhole of poverty.
Many times philanthropists and governments have tried to tackle its disadvantage but it has proved stubbornly hard to “fix”, lagging behind even when the rest of the city was booming. Around Britain, at least 21 per cent of children live in poverty. “The highest classification of over 40 per cent exists in a swath across the East End,” says Donald Hirsch, head of income studies at the centre for research in social policy at Loughborough University. “It’s not just a pocket. It’s whole boroughs [municipalities] with four out of 10 children in families where there are either no jobs or very low incomes. It’s the biggest concentration of poverty in the country, which is interesting because it’s in such a rich city.”
In some East End suburbs, the rate is more than 70 per cent. Children in the East End have a smaller chance of reaching university. Health is poorer, and death, on average, comes sooner than for other Londoners. The physical fabric is run down. Buildings are scarred by traffic fumes and marred by peeling woodwork; open doorways often reveal tired paint and shabby carpet. Grim council towers rear, the legacy of slum clearance and the need to rebuild after the Blitz. There is little open space for play; one of the few small parks is dedicated to Altab Ali, who was murdered there in 1978 in a racially motivated attack.
As Britain’s economy has flattened and tens of thousands of jobs have disappeared, many in the East End believe the fight has been lost before they have even entered the ring. “Youth employment opportunities have absolutely shrivelled over the last few years,” says Professor Anne Power of the London School of Economics, who conducted a 10-year study of East End families. “Young people see the people around them losing jobs, they hear the job market is competitive and if they’re not doing well at school, they lose hope.”
Now East Enders are being offered a sliver of light. London won the bid for the 2012 Olympics based on three promises: that this would be the greenest Olympics; that the Games would spearhead efforts to encourage Britons to exercise more; and that Olympic construction would focus on urban regeneration.
The result has been an accelerated transformation of the most dismal and polluted East End suburb, Stratford. The site chosen for the Olympic Park was home to great mounds of rubble from the Blitz, contaminated soil and dumped garbage. Stratford had few transport links and was almost isolated from the rest of London, says Dan Hawthorn, head of the London 2012 team for the Greater London Authority. “It was virtually cut off from the rest of the city.” Now it is getting new train lines, an Olympic Park and athlete’s village, and the largest shopping mall in western Europe (16 hectares on a 72-hectare development, at a cost of £1.5 billion ($A2.3 billion). Australian company Westfield is behind the gleaming glass-and-granite shopping mall and hotel complex, known as Stratford City, which opened in September.
Life has imitated art. The postcode for the new area is E20, the same one scriptwriters created for TV soap EastEnders.
The Olympic Park is not yet finished, with workmen and jackhammers still vying with the newly established grass and wildflowers, but it will be stunning. Award-winning architecture is set in vast, graceful gardens planted with 4000 trees and criss-crossed by newly revived rivers and streams. “It’s very English,” says Julian Sutherland, director for sustainable development at Atkins, the engineering firm for the Games. “The park here is like other parks in London, a very relaxed, landscape feel. We wanted to create the atmosphere of a summer festival.”
It is as foreign to the concrete and cramming of the old East End as a spaceship from Mars. It is hoped the attractions that will stay when the Games are over — the velodrome, the BMX track, the aquatic centre and the ball games centre — will pull people into the area, along with the twisty red tower of the ArcelorMittal Orbit, built purely as a quirky landmark that tourists will be able to climb. West Ham football team is one of the bidders to be a tenant of the stadium.
An Olympics-legacy company has been set up to oversee the conversion of the park into the core of a new community. The village for 15,000 athletes will be converted to private housing, and the huge media centre for 30,000 Games journalists and broadcasters will become retail and office space. The gardens, and the canals that have been dug out from under tonnes of foul landfill, will offer places to walk, cycle, play, fish and canoe.
“The Games will be just 72 days in a 40-year reconstruction of East London,” Sutherland says.
London has learnt from the refurbishment of the former docks area of Canary Wharf, where office towers and grand apartments did little to benefit the poor already living there. As part of the Stratford development, Westfield agreed to provide social benefits. Construction teams hired local unemployed and offered apprenticeships. In the shopping centre, 2000 out of 10,000 jobs were earmarked for local unemployed, and 35 per cent of 5000 homes built into the master plan must be affordable, says John Burton, director of Westfield Stratford City.
“The value of community benefit is £200 million across the whole of the master plan, not just Westfield,” Burton says. This includes an “academy” based in the shopping centre where people without skills are trained in retail, hospitality, security or other roles that would make them attractive to employers. “We train people who have never been in a job to make them fit for an interview,” Burton says. “It’s about trying to break the vicious cycle. In some families there are three or four generations on welfare.”
It is hoped the developments will bring new work, new homes and new wealth. If the plan succeeds, it could be a model for urban renewal in future Olympic cities. If it doesn’t, Stratford’s arenas will join the white elephants of Olympics past in cities such as Barcelona, where a diving pool is overgrown with shrubs, or Athens, where pigs snuffle through the 20,000-seat weightlifting stadium.
“There’s a history of Olympic villages having a hard time turning into anything else,” says Doug Saunders, a journalist and author of the book Arrival City: The Final Migration and Our Next World, which has a chapter on the East End.
For those East Enders who have won a job after struggling for years on the dole, life has been transformed. Burton says he was staying in one of the development’s hotels where a young woman served him. He learned that she was a 27-year-old single mother and this was the first job she had ever held: “She said the proudest day of her life was when she [went to the dole office] to sign off and say: ‘I no longer need benefits.’ ”
For Hugh Preedy, 53, it has meant his first job in nearly two years. He sent off more than 300 applications in that time and won only eight interviews, despite having had a solid 17 years in the wine trade, and 10 years before that in toys and games. Now he works at Stratford City selling glass and china in the John Lewis department store (Britain’s equivalent of Myer). “I think the whole thing is incredibly positive,” he says. “I have lived all over London, and the East End has suffered from a catastrophic lack of investment for 30 or 40 years. Some people who have been here for a long time [think:] ‘Nobody loves us, they don’t care.’ ”
For every Preedy, there are many more who missed out. John Lewis at Stratford advertised 800 jobs and received 13,000 applications. The store normally has a 15 per cent dropout rate with new recruits; here, the rate has been zero. East Enders are desperate for work.
The mayor of Newham, the borough in which Stratford sits, is delighted by the twin developments of Olympic Park and Westfield but has no illusions about the oceanic need. Sir Robin Wales says there are six boroughs in the East End, and his own has to find jobs for 20,000 people just in order to lift itself to the same jobless rate as the rest of the country. “Eighteen thousand people here have never, ever worked, out of a population of 300,000,” he says. “Give me six Westfields and I will change East London.”
But even those East Enders who don’t win a job from the immediate transformation will be able to enjoy outdoor space in a way that has never before been possible. Professor Power’s study found East End families were worried mostly about money, but that second to that was the lack of activities for their children.
“Because of the shortage of money, [some families’] kids would take it in turn to go to the school football club,” she says. “They are living in a rich city, so everything is very expensive, which means they can’t access a lot of things.”
Parents’ fear of the streets — that their children would be attacked or pressured to join gangs — made them reluctant to let children outside, she says. “But it’s physically impossible to keep teenagers locked in a small flat. That’s why you get gangs in the street. They are just groups of young people with nowhere to go and nothing to do — with an adult population that’s afraid of them.”
So the open spaces of the new park are welcome, says Power, as is the possibility that locals might be trained for jobs maintaining the gardens and facilities.
She is concerned, however, about how the changes have already had “a knock-on effect” in terms of rising East End property prices. She said a small house in Hackney was recently offered for £600,000: “There’s no typical family that would come within miles and miles of that.” Prices were already going up for other reasons, including the demolition of council housing towers: “The councils are displacing large numbers of poor people, so in that sense, too, the East End will be transformed.”
It is the eternal dilemma of urban regeneration: make a rundown area more desirable and suddenly the poor can no longer afford it. But Power reserves her most scathing comments for the shopping mall. “I absolutely hate that kind of development,” she says. “They destroy dozens and dozens of small, ‘get-by’ businesses that everybody used. Each time you get a mega-development like that in a poor area you destroy so much.”
Power can see the big picture because she knows of the studies that lie behind this prognosis. For Preedy and other locals who have clambered aboard the new lifeboat, there is only the glow of the present — and the fear it might not last.
“The greatest local concern is what will be the post-Olympic legacy?” he says. “What will happen when the crowds and the spotlight of the world turn away and go somewhere else?”
But experts say the transport links that have been created to move hundreds of thousands of spectators to and from the Olympic Park will forever change the East End for the better. It now has 10 railway lines including an international one. “Stratford is now one of the best connected places in London, including a [rail] connection to Europe,” says the Greater London Authority’s Dan Hawthorn.
“That will bring benefits for decades to come,” says Paul Johnson, an economic historian who specialised in the East End before becoming vice-chancellor of Melbourne’s La Trobe University. He says the benefits will be localised to Stratford at first but will begin to seep through the other boroughs. The new area “will bring people in, there will be major sporting events, concerts, exhibitions. It will begin to change Londoners’ minds about the East End.”
Hawthorn hopes it will also change the mindset of East Enders themselves. “We want to bring the quality of life up to the London average, so that the East End can imagine itself as having as much chance to succeed as the rest of London.”

First published in The Age.

Another generation of Irish forced to leave their homeland

Ireland was the Celtic Tiger of the ’90s but has been reduced to a mewing kitten. Like so often in the past for so many, the answer is emigration. Karen Kissane reports.

DUBLIN

EVERY culture has its own spectre of hardship, says economist Alan Barrett. For Germans, it is the hyper-inflation of the Weimar Republic and its destruction of families’ hard-earned savings. For the English, it is the rationing during and after World War II, which left some in that generation still prone to hoarding every time headlines cause alarm. For the Irish, it is landlessness.
Their folk memory turns on the stories of the potato famine of the 1840s, when starving people were evicted from their homes by English landlords and died by the roadsides with grass stains around their mouths.
Even today, says Professor Barrett, of Trinity College, Dublin, “in the social collective consciousness, losing your property and eviction are the worst things that can possibly happen.”
This has led to a national preoccupation with property ownership, agrees Professor Piaras Mac Einri of Cork University, “We have an obsession with land. Owning your own land is the biggest thing you can do.”
Which partly explains what has happened with traditionally frugal, hard-working Ireland. In the 15 years to 2008 the country boomed, proclaimed as “the Celtic Tiger”. On a surge of prosperity and optimism, and turbo-charged by low interest rates, Ireland spent billions building roads, luxury hotels, golf courses, and a gleaming, futuristic, €600 million (A$783 million) international airport, T2. The Irish also borrowed heavily to buy into a feverish local property market.
Barrett, who is on secondment from Ireland’s Economic and Social Research Institute, says: “If you asked anybody what was the big benefit of the Celtic Tiger, I think a lot of people would have answered that for the first time ever, if you were born in Ireland you could assume that you could live and work in Ireland for the rest of your life.”
But the Celtic Tiger is now a mewing kitten. Last month marked the first anniversary of Ireland’s humiliating bailout by the troika of the European Central Bank, the European Commission and the International Monetary Fund, without which it would be bankrupt. Ireland has also just suffered its fourth consecutive austerity budget, this time one that provides an “adjustment” of
€3.8 billion through increased taxes and slashed spending. It follows cuts of €4 billion last year.
The Irish are talking about unemployment tripling to 14.5 per cent with 450,000 now jobless, about the way houses have lost half their value and about the big cuts to salaries and social services that make life harder. But there is another painful Irish spectre that is not getting as much airplay — forced emigration.
Emma and Eoin Monaghan are typical of those hardest hit by the crash. They have regretfully decided that they must leave the country if they and their children are to have a future. He is 35 and works as a thermal insulator; she is 29 and works part-time as a make-up artist. They have two children, five-year-old Jamie and baby Maleah, nine months, and live in a Celtic Tiger-era housing estate at Donabate, on the edge of Dublin.
They did what they thought was the responsible thing and bought a house before they had children, at a time when prices were rising fast, because they feared they might not get into the market at all if they dithered.
“The day we actually bought, there was a big queue,” Emma says. “They said if you didn’t bring your deposit within 24 hours you would lose your place. We were so frightened that we wouldn’t even get on the property ladder.”
They were conservative, for the time; they took a mortgage of 100 per cent, when all around them people were borrowing even more than that to add on a car, or a renovation. Between 1998 and 2008, Irish banks borrowed €300 billion to fund loans for property speculation, which amounted to 2½ times the country’s gross domestic product.
In 2008, the Irish government offered to guarantee six banks, thinking they had a temporary liquidity problem. But the banks were close to insolvent, and the guarantee has cost the Irish people many billions more than expected.
Now that the property bubble has burst, with busted banks close to being nationalised and the nation crippled by a ruinous €144 billion debt, Emma and Eoin are left with a house that is valued at €150,000 less than they paid for it. About 100,000 Irish families are in trouble with their mortgages, and most of them are in negative equity too, which means they can’t sell and start again. One senior economist estimates that 25,000 families could lose their homes by 2013.
Construction employed 286,000 people at the height of the boom but that has shrunk to only 100,000 now. “I have never been out of work but now it’s looking likely,” Eoin says. “I was with this firm for nine years and it went bang.” He has contract work that will see him through to Christmas but after that, nothing.
The Monaghans know at least five families in their social circle who are emigrating; three are already gone. “People are panicking now; they are just jumping ship,” says Eoin. Emma adds: “We both have work at the moment, but we are saying we should go before it gets too bad.” Their preferred destination is Australia, which Eoin loved when he worked in Sydney several years ago.
It would be difficult to leave their families, Emma says, “But we have got to think of the kids and their future. There really is nothing, no kind of opportunity here.”
About 40,000 Irish nationals have left the country in the 12 months to last April, along with 36,000 people of other nationalities.
“Emigration” is a dirty word in Irish politics. Politicians prefer to paint it as young people spreading their wings. “It’s not really emigration if you want to go and experience Bondi beach,” Irish Finance Minister Michael Noonan tells The Age.
It is true that because it is a small country (Ireland has only 4.5 million people), many voluntarily travel to see the world or improve their CVs. Karen McHugh migrated to Germany for several years when only three of her class of 250 engineering graduates found jobs in Ireland. “Irish people . . . know that we don’t have enough of a population to sustain ongoing growth, so people get used to travelling for work,” she says. “It’s part of our psyche.”
McHugh is now back in Dublin and managing director of technical recruiting firm JobContax. She finds engineers and other specialists for overseas projects, including several in Australia.
“I came back because there was work here again,” she says of her return. But now she sees even highly qualified, experienced people scrabbling for a job. When her website was mentioned on the national broadcaster, it received 4000 hits each day of the following weekend.
“People are sick of the government, they feel they are being screwed over taxes — a lot of people have had enough,” she says.
But they also feel anguish about family separation.
“People who have got elderly parents — that’s the biggest wrench.”
Emigration has long been the Irish escape at times of greatest hardship. More than 2 million people fled the country during the Great Famine of the 1840s; half a million in the 1950s; and 200,000 during a downturn in the late 1980s. The Irish diaspora — of emigrants and their descendants — now vastly outnumbers the Irish at home and is estimated at more than 70 million people.
Critics say this history has taught Ireland’s policymakers to rely, like Aesop’s lazy donkey, on a lightening of the load through emigration whenever times get tough. A study of 90 young unemployed people by the Youth Council of Ireland this year found that 70 per cent thought they would emigrate and many believed the government was relying on it.
“It’s a handy way for them to export the problem and to cut the costs [of welfare payments],” says one. Another says: “I am sure it is built into the economic projections for the next five years because there doesn’t seem to be any meaningful policies being developed to help young unemployed people.” Youth unemployment is running at 24 per cent.
Macdara Doyle, a spokesman for the Irish Congress of Trade Unions, says: “The jobless figures have not risen to Spanish levels [where youth unemployment is 40 per cent] because people are leaving. We’ve had [whole] classes of newly trained teachers heading to the southern hemisphere, of newly graduated nurses being recruited en masse by [Britain’s] National Health Service. And thousands more are leaving quietly.”
Minister Noonan says three out of five of his children are abroad, “and none of them would regard themselves as emigrants . . . It’s certainly not a matter of policy for the Irish government [to rely on emigration]. It’s a consequence of the recession.”
Professor Mac Einri, director of the Centre for Irish Migration Studies at Cork University, says there is forced emigration and that it is a political safety valve, as well as “a declaration of the failure of the independent state. We haven’t managed to create an economy that works in a way that creates jobs for these people. There’s a huge sense of inchoate, subterranean bitterness here”.
Noonan says many who leave will be back, and Mac Einri confirms that about half of those who left in the 1980s later returned, bringing with them the skills to start Ireland’s own software industry. Google and Twitter have set up large bases in Ireland.
He points to the nation’s other strengths, which compare well with the turmoil of its bailout companion Greece: a young and well-educated workforce, excellent infrastructure, social and political stability and the ability to collect taxes effectively. Indeed Ireland has obediently swallowed the troika’s bitter medicine of austerity and is the poster child for bailout nations.
BUT, while exports of many kinds are doing well — Ireland produces the entire world supply of Botox — the domestic economy is flatlining because consumers are too frightened to spend.
It is a struggle for Ireland to get back on its feet given its huge interest bill. Even the tough-love Noonan, who has overseen the budget cuts, says Ireland needs a “haircut” to reduce its debt. Economists warn privately that the current figures would mean austerity for at least 10 years, strangling domestic growth.
And then there is what one senior official calls “the mood music” of the euro-zone crisis. “We are sitting here doing our best but if the whole eurozone collapses, Ireland is completely screwed,” says Alan Barrett.
A recent report from Ireland’s Economic and Social Research Institute warned that Europe faced another Great Depression if it did not resolve the crisis, and that Ireland’s forecast pick-up next year had now reversed, with a prediction of another 22,000 unemployed.
Emma and Eoin Monaghan don’t need that warning. They see emigration as the only way they can carve out choices for their family. “We are trying to take control of our future, rather than just existing,” Emma says.
If they can work their way through the bureaucratic tangle, they will soon be farewelled at Ireland’s gleaming new airport by tearful mothers like one featured recently on an Irish TV documentary. She hugged her daughter and her two grandchildren and watched them go through the gates to a new life in Canada.
“I just feel we are exporting our kids,” she said, wiping her eyes. “We are bringing them up, educating them and then giving them away. My grandchildren too — it’s two generations.”
For her and many like her, Ireland has again become, in the bitter words of writer James Joyce, “the old sow that eats her farrow”.

Karen Kissane travelled to Dublin as a guest of the Irish Government.First published in The Age.

Italy’s numero uno faces challenging numbers game

LONDON: It’s hard to find someone with a bad word to say about Mario Monti, the bureaucrat catapulted to prime ministership of Italy this week in the hope he can rescue it from the financial mire. But then, everything is relative, and it’s easy to look good when your predecessor was Silvio Berlusconi, the ageing roue who has been likened to a cross between Vladimir Putin and Benny Hill.
As a respected economist and bureaucrat, Monti, 68, is a sterling exemplar of his kind. For critics worried about democracy, though, there has been a question about an unelected person running a nation.
But concerns about the will of the people are low on the radar of today’s crisis-driven Europe. To the leaders of France, Germany and other euro zone economies, there is a more burning issue, one on which the future of Europe might depend: can he pull it off?
Monti faces a formidable task: Italy is carrying €1.9 trillion ($2.5 trillion) in debt and its economy has almost stopped growing. Markets fear it may not be able to keep up its repayments. The interest rate on Italy’s sovereign bonds has been bouncing around the 7 per cent mark – the level that tipped Portugal, Greece and Ireland into bailout territory. But Italy, with the euro zone’s third-largest economy, is bigger than the other three combined, and too big to bail out.
If it should fail and default on its debts, the consequences could be devastating. Large banks would also fail, and nations would suffer recession and perhaps even depression.
Monti’s task is to knock Italy’s books into shape in time to prevent such a disaster. His task is to cut spending, raise taxes and restructure the economy and the workforce – tough calls that Italian politicians, unwilling to risk losing voters, have been unwilling to make.
Monti is a Yale-educated academic and was most recently president of Bocconi University in Milan, the training ground for Italy’s financial elite. Highly regarded internationally, he is a member of the Reflection Group on the Future of Europe in 2020-2030 established by the European Council.
He has also acted as an international adviser to Coca-Cola and to investment bank Goldman Sachs.
Monti earned the nickname “Super Mario” during his decade as a commissioner with the European Union.
He slapped down huge, multinational companies while he was competition commissioner from 1999 until 2004; forced France to break up its electricity monopolies; stunned the US by fining Microsoft €497 million ($662 million) for abusing its dominant position; and blocked the then world’s largest merger, a $US45 billion deal between GE and Honeywell he said would hurt the aviation industry.
He also led radical reforms of EU anti-trust rules and competition controls, turning the EU from the skinny weakling of global regulation into something that loomed over corporations like the Incredible Hulk.
“He is intellectually powerful and takes seriously any job he takes on,” says Marco Simoni, an Italian lecturer in European political economy at the London School of Economics.
He is also a pragmatist, Simoni says: “His personal convictions are very grounded in objective analysis of facts. You couldn’t attach any position to him. He’s not an ideologue in the sense of thinking that there are solutions that are always right at any point in time.”
Monti is also perceptive. Two years ago he told a reporter he feared the EU was entering a “quasi-existential crisis”. He has long advocated an economic government for Europe and a European monetary fund, foreseeing the crisis that has now arisen because the shared currency is not backed by a shared budget.
His views on what Italy needs are no secret because he has written about them for years as a columnist for the nation’s largest daily newspaper, Corriere della Sera. “He has many times explained that the best thing for Italy would be the co-operation of different parties in order to overcome problems due to special-interest groups and their privileges,” Simoni says.
He says Italy, unlike Greece, has a budget that is in surplus. Its economy slowed down because it failed to make the reforms needed for a globalising world. It has structural industrial problems such as closed shops, with professions such as law and pharmacy insisting upon minimum charges that make it hard for newcomers to start up and impossible for customers to shop for a discount.
“This is absurd from the point of view of a modern economy,” Simoni says.
It also suffers from corruption and cronyism, tax evasion worth an estimated €100 billion ($133 billion) a year, and a black economy of about 16 per cent of gross domestic product.
Monti’s biggest challenge, however, is more likely to be the numbers in the parliament than those in the national accounts.
Monti was created a senator-for-life last week to make him eligible for the prime ministership. Italy does not have a Westminster system, so its leaders can come from either house of parliament.
This week both the centre right and centre left parties agreed to his appointment. They are thought to be keen for him to deliver the bitter medicine of austerity so that they escape political backlash for it. But if he should take a machete to the labour conditions beloved of the left, for example, or to protections for business groups on the right, it is still possible that political support might evaporate.
On Wednesday he announced his cabinet of 17, an unlucky number in Italy. It includes seven academics, a banker and an ambassador but not a single politician, leaving him with a fresh slate but no political cover.
Monti took on the finance and economy portfolio and said the aim was to kickstart growth: “It will be a race … but we have had many signals of encouragement from our European partners and the international community. I believe all this will translate into … a calming of the market difficulties concerning our country.”
Italy’s politicians are already squabbling on the sidelines. Berlusconi’s party insists Monti should stay only until he implements reforms parliament has already voted for, while the former opposition, and Monti himself, expect him to hold power until the next election falls due in 2013.
Simoni says: “Right now, because of the emergency, the parties are all agreeing, but … when they need to approve important reforms, that will be the crucial moment.
“Within four to eight weeks, we will know whether he is able to pull it off.”

First published in the Sydney Morning Herald.

Dream of United Europe frays at the edges

The warnings have been flying for months, but now it’s crunch time. Is the game up for big Europe? Karen Kissane in London and Eric Johnston in Brussels report.

At a joint news conference last week, Germany’s Angela Merkel and France’s Nicolas Sarkozy let their guard drop. Asked whether they could rely on Silvio Berlusconi to get Italy’s economy in order, they exchanged a mocking glance, rolled their eyes heavenward and smirked.

No one’s laughing now.

Berlusconi, the playboy Prime Minister described by one commentator as a man no one would trust with their daughters, much less their economy, has been forced to exit the political stage, to the relief of the German Chancellor, the French President and most of Berlusconi’s MPs.

But he has left behind a shambles that has become the latest threat to the future of Europe. Italy might soon follow Greece into economic meltdown, a prospect that has sparked talk of a deep recession, an end to the euro and the collapse or shrinking of the European Union.

The crisis in Europe is also undermining the fragile global economic recovery, leaving the world “looking straight into the face of a great depression”, Simon Johnson, a former chief economist at the International Monetary Fund, warned this week.

Other commentators also threw the term about. “I think it is pretty clear that we are in a very precarious economic situation that is highly similar to the Great Depression,” David Edwards wrote in Forbes magazine.

The chief of the IMF, Christine Lagarde, joined the chorus of doom, warning on a visit to Asia that “there are dark clouds gathering in the global economy. Countries need to prepare for any storm that might reach their shores.”

The advice might have been easier for Asia to accept with grace if only Lagarde’s corner of the world had been able to set the example.

But political disasters piled one upon the other at breakneck speed this week, leaving dithering European leaders looking like the Road Runner who has raced off a cliff only to realise, too late, that there is no ground under his feet. Again.

By week’s end, after four days of agonised talks over power sharing, Greek politicians finally named a new prime minister, Lucas Papademos, a former vice-president of the European Central Bank. He will lead an emergency unity government backed by socialist and conservative MPs until early elections, possibly in February.

The decision provides hope to the rest of Europe that the Greek parliament will pass the austerity measures required to get its next batch of bailout funds, without which it will be bankrupt by Christmas.

The Greek economy is in free fall, having contracted 15 per cent under existing austerity measures, says Simon Tilford, the chief economist with the Centre for European Reform in London.

It is feared that if the government defaults on its debts, it will spark a banking crisis through the euro zone.

But only time will tell if Papademos, who negotiated Greece’s disastrous entry to the euro zone, can wrangle the nation’s notoriously fractious MPs into line. ”Even yesterday, the old guards, at least, of both parties were not very keen to co-operate,” George Tzogopoulos, a research fellow with the Hellenic Foundation for European and Foreign Affairs in Athens, told the Herald.

In any case, by the time the Greek announcement came, the glare of the market’s critical spotlight was on Italy. It owes a whopping ?1.9 trillion ($2.5 trillion) – 120 per cent of its gross domestic product.

While the Italian economy is much richer than Greece’s, with a lot more private wealth and profitable industries, investors panicked that the government might not be able to keep up its repayments. Interest rates on its sovereign bonds soared to more than 7 per cent – the rate that sent Ireland, Greece and Portugal reaching for their IMF begging bowls.

The emergency saw Berlusconi packed off and plans developed to install an EU ”technocrat” as the temporary leader. Mario Monti, an economist and a former commissioner of the EU, was being proposed to fill in as prime minister to lead – you guessed it – another ”government of national unity”, like Greece’s.

Front of house, the talk was of undying support for the vision of a united Europe and for the present members of the euro family. Merkel said Germany was ”definitely not pursuing plans” for a smaller euro zone (17 of the 27 countries in the EU use the euro).

Back of house, however, preparations have been barrelling along. The Chancellor of the Exchequer in Britain, George Osborne, has a team working on a plan to protect the pound if the euro collapses. On the Continent, Reuters revealed EU officials had been discussing for months whether some countries should leave – or be thrown out of – the EU.

A senior EU source said ”intense consultations” had been taking place ”at all levels” and that a smaller euro zone was one possibility: ”We need to move very cautiously but the truth is that we need to establish exactly the list of those who don’t want to be part of the club and those who simply cannot be part.”

Greece might have become the cranky relative no one wants at the dinner table.

If Greece should walk away from the union and its mountain of debt – or be ejected, which would require political finesse as the European treaty contains no mechanism for it – it might lead to investor panic. Markets could freeze lending to the next most vulnerable states, like hyenas picking off wildebeests at the back of the herd, as one analyst remarked.

There is consensus that the failure of Italy would almost certainly set the dominoes falling across the zone because Italy is too big to bail out. ”Its economy is three times as big as the Irish, Greek and Portuguese economies put together,” Tilford says.

If Greece leaves, that will make departures by others much more likely and, if Italy left, ”France would be under huge pressure,” Tilford says. ”France assumes that if Greece and one or two other states left, that its status as a core part of the euro zone would be secure. But that’s far from clear. Its borrowing costs are already higher than Greece’s. If Italy goes, France will go, because it won’t be able to reassure investors.”

Raffaello Matarazzo, a research fellow at the Institute of International Affairs in Rome, sees a blacker scenario: ”I think there is no ‘next problem’ after Italy. I think if Italy collapses, the euro zone collapses.”

For ordinary people, ”collapse” would mean living inside a catastrophe. If Greece goes bankrupt, for example, it can expect a run on the banks, possibly with individual investors losing their savings; no more government payments of pensions and wages; and an explosion in poverty and unemployment.

”To avert a situation where significant numbers would have to look for food on rubbish heaps, you would need a massive, co-ordinated, external help program,” says Thomas Klau, a senior political analyst at the European Council on Foreign Relations in Paris.

Saul Eslake, an economist at the Grattan Institute in Australia, says Europe should have allowed Greece to default on some of its debt 18 months ago. ”Greece would have defaulted on less debt and there would be far fewer questions on the future of the euro. Instead, Europe has been kicking the can down the road every time this issue came up.”

But a full default by Greece would risk another Lehman Brothers-type financial shock, a senior financial official with the EU said. Greek debt was held mostly by Europe’s weakened banks. If Greece did not pay it back, this would drain their already low level of capital. ”If we let Greece go, it threatens to bring down the whole system,” he says.

Default by Italy, he says, would be like a nuclear bomb going off on financial markets.

There is so much concern about the immediate pain of money problems, there has been little debate about another potential casualty of the euro crisis: democracy.

European and Greek politicians were horrified when the former Greek prime minister George Papandreou last week proposed a referendum in which the Greek people would be asked whether to accept the terms of the euro bailout. Papandreou lost his position as a result, because the bailout is widely loathed in Greece and politicians thought the Greeks would refuse it – and they decided not to risk facing the will of the people.

Now it seems Italy is to have a ”technocratic” rather than a democratic government. It worries Sarah Ludford, a Liberal Democrat member of the European Parliament for the seat of London. ”When democracy is seen as too uncertain, that is food for thought,” she said. ”It’s almost like the 1930s. It’s a very sobering thought. If it’s necessary to have Mario Monti in charge of Italy for a while, it ought to be strictly limited.”

She says while politicians fear the economic costs of not fixing the problem, they should also be aware of the social costs of their decisions. ”We have seen a rise in extremism on the far right, and when people are fearful for their job or out of a job, they are more likely to find a scapegoat, which tends to be foreigners or migrants. So this is all politically worrying.”

Hans Marten, the chief executive of the European Policy Centre, also warns of social tensions simmering below the surface, including a problematic vein of nationalism.

He says when one adds to this the poor outlook for economic growth in many countries, and high unemployment – particularly among the young – Europe is facing conditions not far from the Europe of the 1930s.

But while the risk of apocalypse is real, there is an alternative future in which the euro zone and the EU survive by evolving. The principle underlying the sliding-doors alternative can be summed up in the old saying, whatever doesn’t kill you makes you stronger.

Under this scenario, the euro zone sorts out who is to be in and who is to be out, and tightens the membership rules so everyone inside the magic circle shares some responsibility for budgets, taxes and debt (fiscal integration). European leaders have discovered with a thud that critical economists were right all along: it is impossible to have a single currency unless the parties share these other policies.

Oversight of national budgets was boosted from last April, giving the European Commission unprecedented access to budget forecasts and spending plans. The measures include significant financial penalties for countries that stray from budget discipline.

Many commentators believe Germany will have to drop its opposition to bailouts by the European Central Bank, which is probably the only body in a position to prop up Italy.

And further integration is seen as crucial to preventing another crisis like this one. ”A European finance minister must be appointed and a common budget must be the main target of a new European ministry of finance,” Tzogopoulos says.

But he – like most of the others interviewed for this story – believes Greece will probably stay in the euro. Greeks are mad at their politicians, and at the bailout terms, but like being in the euro, he says.

Matarazzo says political support for the zone is likely to increase next year, with Greece, France and Italy facing elections that are likely to be won by oppositions that want a closer Europe ”and the possible launch of European bonds”.

Sarkozy has predicted a ”two-speed Europe”, with euro zone states moving closer together and the other EU members making up a looser confederation. He has said: ”There are 27 of us. Clearly, down the line, we will have to include the Balkans. There will be 32, 33, 34 of us. No one thinks that federalism, total integration, will be possible with 33, 34, or 35 states.”

This could further marginalise Britain, whose Prime Minister, David Cameron, has been frustrated by his inability to influence euro decision making during the crisis.

Cameron is torn. He wants Britain to be central to European debate but euro-sceptics in his party want more distance from the European arena. They have been strengthened by the crisis, renewing their calls for Britain to wrest back some of the political powers and policies it has ceded to Brussels.

Critics say the euro zone grew too fast and failed to take voters with it. There is a low turnout for European elections, which is interpreted as a sign that the grand project has failed to enchant the populace.

Another problem is the EU’s cumbersome structure makes its processes for responding to the crisis slow and complex, giving the short-term tactical advantage to nimble markets. But another name for that cumbersome structure is democracy.

”We are a union of 27 member states with governments and parliaments of democratic systems,” says a senior EU official.

”The EU is not the United States of Europe; we do not have a federal government. The European Central Bank does not have a federal reserve bank, so we have to go back to national parliaments [for decisions to be ratified].

”That is the nature of the EU and others should not be complaining about that.”

Whatever the outcome, there will be a lot of suffering along the way. Greece has no easy options; the austerity measures and complete default will both mean economic hardship.

Others in the union will suffer, too, says Florian Baumann, of the Centre for Applied Policy Research in Munich. ”The other countries like Germany and France which are not so seriously affected, they will have to suffer because of the money they gave away for the bailout [of Greece]. And another problem that will affect all the countries of Europe is the recession.”

He believes political leaders were right to block the Greek referendum. A deep crisis is no time to go to the people for a vote, he says. ”It’s not a wise idea to involve people in urgent and very complex decisions in the [European] project. And no one ever wants pension cuts or to lose income. I think what Europe will have to do in the future, though, is let its people decide about the general development and politics of the EU.”

As the crisis lurches on, it is important to remember the EU’s achievements, says Australia’s ambassador to the EU, Brendan Nelson.

”Look at Australia. We are a federation with six states and two territories. How long have we been talking about a common education curriculum in Australia? We started in 1961 and we are just now on the cusp of this. Imagine 27 countries – 17 in the euro zone – who are trying to manage the problems associated with the monetary union without a fiscal union.

”We are very frustrated about the pace and scope of the member states in dealing with the crisis. But if you step back and say, ‘Well, in 18 months they have reached the point where 27 countries – not six states – can now check each other’s budgets and budget forecasts and they’ve put an emergency fund together’. There’s a lot that’s been done.”

Nelson, a former leader of the Liberal Party, likens the European response to the crisis to ”making sausages”.

”It’s best not to watch. It’s just good to see the final product. And when we get to see that – I don’t know.”

First published in the Sydney Morning Herald.

Fears ease but Europe not yet out of woods

LONDON

IT IS not always easy to be German in a part of the world where the horrors of two world wars are still within living memory. More than six decades of model citizenship have not yet erased old resentments that, in some quarters, are still simmering.
So for German Chancellor Angela Merkel to say what she did this week was remarkable. She warned that another half-century of peace and prosperity was not to be taken for granted, and that if the euro failed, Europe failed. She added: “We have a historical obligation: to protect by all means Europe’s unification process, begun by our forefathers after centuries of hatred and blood spill. None of us can foresee what the consequences would be if we were to fail.”
Just in case readers failed to get the drift, Britain’s conservative Daily Mail distilled her comments into a headline that evoked ugly spectres: “German chancellor warns of war if currency fails.”
The newspaper wrote: “That Germany, the country responsible for two world wars, is raising the prospect of future conflict is a measure of the panic sweeping Europe about the unrest that could follow a collapse of the single currency.”
Immediate fears about the future of the euro have eased after this week’s historic European summit — historic partly because it managed to win any agreement at all — in which a deal was hammered out that is aimed at solving the financial crisis.
Creditors, mostly banks, have reluctantly agreed to halve Greek debt; the European bailout fund is to be boosted to €1 trillion ($A1.3 trillion), in case other countries such as Italy or Spain should need to call upon it; and banks are to raise more capital as a backup for trouble.
Markets bounced back like Tigger on the news, but Europe and its single currency are not yet out of the woods. Analysts warn the risk of economic apocalypse is less likely for the moment but still possible in the longer term.
If it is to be avoided, the European Union will have to fix the loopholes that allowed this crisis to seed and to fester. This will probably mean setting up some kind of central oversight of its member-nations’ tax regimes, budgets and deficits — a prospect that some leaders might be quietly starting to recognise, but one for which most of their voters back home, proud of cultural identities and national sovereignty, are not at all ready.
Those who manage money call this unifying process “fiscal integration”. British Chancellor of the Exchequer George Osborne is among those calling for the EU to accept the “remorseless logic” that having a shared currency makes necessary this second kind of “financial fusion”. Euro-sceptics have long argued the shared currency couldn’t work unless members also shared oversight of budgets or a federal budget; a view the current crisis seems to have borne out.
Europe is now facing a wide range of scenarios about its future, says Thomas Klau, editorial director of the Paris-based European Council on Foreign Relations, “ranging from the catastrophic to the positive”.
His vision of the negative extreme echoes Dr Merkel’s: “A disintegration of the euro with consequences ranging from deep depression in the euro zone and beyond to the triggering of a rise in nationalism, xenophobia and aggressive populism, leading to severe instability in the democratic system.”
The more positive scenario, he says, is that this crisis, like previous ones, will instead force a major shift towards greater cohesion, “with the countries of the euro currency building something like a federal system to run their economic, budgetary and fiscal policy”.
He thinks the second scenario more likely and is sceptical about the idea that it would be stymied by popular anti-EU sentiment in countries such as Germany. The fear of loss of identity and control have always been big stumbling blocks to union, and the current rescue plan was so long in the making — it took 14 summits over 18 months — partly because many of the decisions had to be taken back to national parliaments for approval.
“There is a difference between voter sentiments and voter behaviour,” Mr Klau says. “Let’s look at election results rather than commentary, analysis and opinion polls. In Germany, voters have voted for parties that are more pro-Europe. They have strengthened the Greens and the Social Democrats and pushed away the party that was openly supporting Euro-sceptics.”
For now, the main question is whether growth will return. This depends on whether markets will support the rescue deal once the fine print is finalised by the end of the year, or whether they will freeze lending because they get spooked again — most likely by Italy, says Waltraud Schelkle, a senior lecturer in political economy at the European Institute at the London School of Economics.
Italy’s debt is running at 120 per cent of its output. Dr Schelkle says Italy has sold its sovereign bonds very short-term, which means it will have to refinance regularly: “So the situation will come again and again, and given the sick state of the economy at large, they will always be situations that could make financial markets nervous.”
Her worst-case scenario involves the markets turning against holders of Italian bonds — many of whom are families using them as retirement savings — followed by a run on Italian banks: “Then, I am afraid, Italy can’t be saved [even with the €1 trillion fund]. It’s too big. It would be so massive a write-down.”
She predicts this scenario would lead to much tougher regulation of capital, with people not able to move money across borders so freely: “We won’t have free markets any more.”
Dr Schelkle does not believe the current rescue plan will hold up. She says the European Central Bank must be authorised to step in and buy unlimited quantities of the bonds of troubled countries facing an emergency.
The need for a bigger role for the ECB is a view pushed by French President Nicolas Sarkozy. He has been arguing the case to a resistant Mrs Merkel, who says Germany refuses to accept such “non-standard measures”.
Meanwhile, both leaders have mocked Italian Prime Minister Silvio Berlusconi; rolling their eyes when his name was mentioned at a press conference this week. Mr Berlusconi is struggling to hold his government together while developing austerity measures that pass muster with the EU.
One topic notable for its low profile in public debate is the question of whether Europe’s troubled banks should be more tightly regulated. Many of them need more capital in order to withstand Greece’s troubles and whatever might come next.
Dr Schelkle says regulating capital flows is not being discussed because the timing is sensitive. “You would at the moment make the markets extremely nervous by showing them the torture instruments,” she says.
But she believes “it’s quite outrageous” that banks’ failings pushed the world into recession in 2008-9, made national budgets blow out more severely and led to greater debt, “and then they turned around [to troubled countries] and said, ‘You are not a good investment’”.
They also had been told from 2002 onwards that Greece was in trouble: “The financial markets knew bloody well that Greece’s budget was dodgy. It wasn’t that they woke up in December 2009 to news they never had. They financed it because no one wants to get out of the bandwagon as long as it runs.
“We left a lot of regulation to banks themselves but they don’t understand their own risk models. Self-regulation left banks to estimate their own risk and obviously they couldn’t.”
But she, like Mr Klau, believes the euro will survive: “There is too much invested in it, politically and economically. The euro will be sacrosanct in the end.”

First published in The Age.