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Draghi Takes ECB to Land of Gomorrah as Naples Prays

As Europe’s central bankers gather in Naples to discuss the state of the region’s economy, the city stands as a stark warning of just how bad things can get.

“If there’s a periphery of the euro zone’s periphery, that’s Naples,” said economist Riccardo Realfonzo, a former councilman of the Southern Italian city. “The gap between the debate at the Royal Palace in Capodimonte and everyday life can’t be filled with just monetary policy.”

In that hilltop residence where the Bourbon kings once harshly ruled Naples, members of the European Central Bank’s Governing Council will meet tomorrow for one of two gatherings they hold every year away from their Frankfurt base. Looking down over narrow streets where protesters will throng, President Mario Draghi and colleagues will discuss their plan to buy asset-backed securities in a bid to drive stimulus for the euro zone.

The meaning of that policy might be lost on Naples’s 960,000 inhabitants struggling with just the hardships that the central bankers want to address: economic stagnation, slowing prices and unemployment. The whole is made worse by a local mafia, the Camorra, whose stranglehold on the region was described by Roberto Saviano in the international bestseller “Gomorrah.”

Photographer: Alessia Pierdomenico/Bloomberg

A pedestrian shelters from the rain beneath an umbrella as she walks along a side street in Naples.

That title underlines the malaise of a part of Italy whose despair has often been framed in Biblical terms to match its religious fervor. In the mid-19th century, British statesman William Ewart Gladstone said that the Bourbon regime portrayed itself as “the image of God upon Earth” but amounted to “the negation of God erected into a system of government.”

Bread & Justice

In Naples “there is a hunger for bread and justice, hope and future, work, legality and planning,” local Catholic Archbishop Crescenzio Sepe on Sept. 19 told the faithful gathered in the city’s medieval cathedral for the ritual of the so-called miracle of San Gennaro, the patron saint.

Last year, Naples scored the highest among Italy’s main cities on the misery index, a gauge which combines unemployment and deflation. With a reading of 26.7 percent it stood above Greece, according to Bloomberg calculations. Much like Greece, Naples, hard hit by Italy’s longest recession on record, risked default this year after a court rejected plans to cut municipal debt of about 1 billion euros ($1.3 billion).

Nor do its troubles end there. Located in one of Italy’s poorest and most crime-ridden areas, Naples’ 2013 gross domestic product per capita was one-third less than Italy’s average and its unemployment was more than double the national average at 25.8 percent. The city is also prey to periodic garbage crises caused by overflowing landfills and saw its transport system come to a halt last year amid strikes and fuel shortages.

Photographer: Ralph Orlowski/Bloomberg

European Central Bank President Mario Draghi.

Draghi Masks

Last week, activists of the “Social Network Against ECB” held an impromptu press conference at a Naples bank. Wearing masks portrayingDraghi, German Chancellor Angela Merkel, and Italian Prime Minister Matteo Renzi, they announced a protest march against tomorrow’s ECB meeting.

“People who suffer from the consequences of the economic crisis every day of their lives will be out there demonstrating tomorrow,” organizer Alfonso De Vito, 40, said in a telephone interview. “We will also hold a counter-summit today at the University of Naples focusing on the effects of the Troika’s policies,” he added in a reference to the ECB, the European Union and the International Monetary Fund.

Stimulus Measures

One month after cutting interest rates to record lows and pledging to buy asset-backed securities and covered bonds, the euro area’s central bankers will present details of their newest stimulus measure. The asset-purchase plan, part of a strategy intended to add as much as 1 trillion euros to the ECB’s balance sheet, will be scrutinized to assess whether it’ll be enough to boost prices and revive the 18 member euro region’s economy.

“Shutting themselves up in Capodimonte was a smart move by the bankers since the palace is isolated, but this event could end up being just another problem for the city,” said Francesco Mingacci who runs a cafe on one of the streets protesters will cross tomorrow. “I don’t think the ECB meeting can change things, we don’t have faith in anyone anymore.”

San Gennaro

In the meantime, much as in the past, locals look to saints for divine help. In the San Gennaro ritual, what is believed to be the blood of the 3rd-century saint contained in two phials is held up before huge crowds by the city’s cardinal to see if it liquefies. That’s what happened last month, as the crowd in and outside the church greeted the announcement with warm applause.

For most Neapolitans, the success of the ritual, which took place for the first time in 1389, is a good omen for the city.

“The miracle would be if European governments finally agreed on expansive fiscal measures,” said economist Realfonzo. “Naples is the best proof of how even accommodative monetary policy is set to fail if not coupled with expansive fiscal policies.”