Prime Minister Mario Monti’s government late yesterday won an Italian senate confidence vote after the new Italian Prime Minister laid out radical economic reforms aimed at cutting Rome’s huge debt mountain, boosting growth and preventing Italy from dragging down the eurozone.
Italy must stop being considered Europe’s “weak link,” he said as he announced austerity measures which would be balanced by “growth and equity” to help lift Rome out of the eurozone crisis and affirm its place in the eurozone.
As well as planned cuts, Italy must “invest in its young and talented” and “tackle unfair privileges” enjoyed by certain sectors of society, he said.
Mr Monti, who is racing to implement initiatives demanded by Europe, including a pensions and labour market overhaul, told Italians fearful of losing their sovereignty that the reforms were not being “imposed by external forces.”
“It’s not a case of them on one side and us on the other. We are Europe.”
“The future of the euro also depends on what Italy will do in the next few weeks,” he said.
Although Mr Monti won the Senate vote, he could face a political backlash when he begins implementing the painful and delayed economic reforms.
While he has won endorsements from all of Italy’s main political forces so far, the economist faces a major challenge in steering a course through a fractious political world, with particularly intense sniping from Berlusconi allies.
Thousands of students took to the streets in Italian cities ahead of his speech yesterday. In Milan they threw flares at riot police during protests against a technocratic government they fear will act in favour of fat cats and bankers.
The soft-spoken Monti appears, however, to have already garnered the support of more than half of Italians, according to a poll by IPR Marketing.
The inclusion of key pension and labour reforms sought by the EU in Italy’s crisis game plan is expected to reassure markets.
“We need measures to make the economy less fossilised, help new industries grow, improve public services and favour youth and female employment,” he said.
“If we fail, if we don’t carry out the necessary reforms, we will also be subjected to much harsher conditions,” Mr Monti warned.
Politics professor Giuliano Noci said the programme “includes everything which one could imagine carrying out in Italy and would allow – if implemented – a truly great revival of the country.”
Mr Monti’s reforms will be “the first step in an operation to restore credibility lost under Berlusconi,” the daily La Repubblica said.
The technocrat faces his first international test next week, when he is expected to travel to Brussels, Berlin, Paris and London, it said.
German Chancellor Angela Merkel urged Mr Monti to move fast to implement the “crucial” reforms, while Eurogroup chief Jean-Claude Juncker insisted on the EU’s “full confidence” in Rome’s ability to overcome the current crisis. Italy’s economic commentators sounded a cautious note, with Il Sole 24 financial daily saying Italy’s future was “on a knife-edge.”
Fitch ratings agency said there was “a window of opportunity for the new Italian government to generate a positive surprise” and “break the negative market dynamics and shift bond yields towards a more sustainable level.”
But it warned: “Italy is likely already in recession” and the cabinet’s task has been made “more difficult” by the downturn in activity across the eurozone.
The International Monetary Fund (IMF) announced it would send a monitoring team to Italy this month at the invitation of the Italian authorities.
The rate on Italian 10-year government bonds has hovered around the 7.0 per cent warning threshold that set off alarm bells in Europe and beyond.