The InternationaList: May 16, 2008

Palaces Over People In Italy
By Barbie Nadeau
It's been more than a month since an earthquake devastated the Italian city of L'Aquila. But nearly 1,500 residents are still living in tents, as the government rebuilds churches and ancient palaces ahead of residential buildings. L'Aquila will host the G8 summit in less than two months; since church restorations are being funded by foreign donations, there's speculation that Prime Minister Silvio Berlusconi wants to show G8 leaders that their investments are producing results. (Click to view a photo gallery of the Italy Earthquake)

But L'Aquila's residents and opposition leaders are criticizing the focus on antiquities ahead of housing. While the city's hospital is still functioning below full capacity and tent camps lack hot water, reconstruction funds are being funneled to the city's Duomo, its 15th-century San Bernardino church and even to five-star hotels and the local airport (which was not even damaged in the quake). Tent-camp residents have been told their first permanent housing—prefabricated huts—will be in place by Sept. 10. The G8 leaders, meanwhile, have been promised a place to sleep by July 8. "Our philosophy has always been clear," said Berlusconi on a recent visit to the area. "The people come first." Many in L'Aquila wonder which people he meant.

Righting the Scales
By Rana Foroohar
you've heard the bad economic news—the most recent U.S. GDP numbers are the worst since the 1970s. And you've heard the good news—that markets and factory orders are up. But the economic indicator that really matters is one you probably haven't heard about: the "current-account imbalance" between America and China is finally shrinking. That means the gap between what we're exporting and what we're importing is declining. That's important because during the boom, the Chinese plowed all the dollars we spent buying their stuff, plus the money they saved, into U.S. government securities, fueling a big debt bubble.

Now suddenly thrifty Americans are buying far less from the Chinese. Goldman Sachs expects the U.S. current-account deficit to narrow to about 3 percent of GDP this year, down from a peak of 6 percent, and for China's current-account surplus to narrow to 8 or 9 percent, down from 11 percent. The upshot is that the global economy is starting to rebalance, and that eventually will lead to much-needed financial stability.

Even better, Americans can take most of the credit for the progress so far. The correction is largely due to greater U.S. savings and increased domestic investment. The U.S. personal-savings rate has risen from zilch last year to 3 percent of disposable income, and Goldman expects it to rise to 8 percent by the end of next year. Who says all Americans do is shop?

Iraq, Mon Amour
By William Underhill
America may yet win the war in Iraq, but France, which bitterly opposed the war, looks set to win the contracts. Iraq needs at least $400 billion to restore its battered infrastructure, and a slump in oil prices means Baghdad is eager to attract private money. Foreign investment rose 1,500 percent as stability returned last year, but U.S. firms are "negligible players," says a report from Dunia Frontier Consultants of Dubai. That's in part because "U.S. firms with the highest tolerance for risk don't have the history or the experience" to work in Iraq, says Kyle Stelma of Dunia. But the French do, thanks to political and business links that date to the Saddam Hussein era, when France built much of the infrastructure that now needs replacing, including the Osirak nuclear reactor later destroyed by Israeli warplanes.