Italy’s new technocratic government led by Prime Minister Mario Monti took charge of the eurozone’s third largest economy last week in a move broadly welcomed by the markets, the political and business establishment, public opinion and Italy’s EU partners.
His priorities are to reduce the costs of the Italian political system and all its privileges- Anthony Manduca
The general feeling is that given Italy’s precarious economic and financial situation Monti is the best person to bring about much needed reforms, cut down on public debt and kickstart the economy.
Monti has an impressive track record. A distinguished economist and president of Milan’s Bocconi University since 1994, he served two terms on the European Commission from 1994 to 2004, as Internal Market Commissioner and later as Competition Commissioner.
During his stint in Brussels he enjoyed a reputation as a hard working, no-nonsense diligent technocrat. As Competition Commissioner, for example, he fined Microsoft €497m for abuse of its dominant position and blocked a proposed merger between General Electric and Honeywell, the engineering and aerospace giant.
Addressing the Senate last Thursday, Monti outlined his government’s economic plan, saying austerity measures would be balanced by economic growth and social fairness.
He promised to respect Italy’s timetable to balance its budget by 2013 and reduce its debt, to overhaul the pension system which he said “has large disparities in treatment and unjustified privileges for certain sectors”, to clamp down on tax evasion and to introduce incentives for companies to employ more women and young people.
Monti is aware of the challenges his government faces and has decided to take on the responsibility of running the Finance Ministry, a sign that he will adopt a hands-on approach to make the country’s finances more sustainable.
He also told Senators that if Italy failed now to restructure its economy, the terms imposed on Italy would be even harsher. Monti made it clear that the single currency’s future is at stake, saying before the Senate voted in support of his government: “The future of the euro also depends on what Italy will do in the next few weeks.”
Italy is now resting its hopes on the new team of technocrats, which is not a new experience for the country – the last technocratic government led by Lamberto Dini in 1994 lasted 15 months and carried out important pension reform.
Italy’s new slimmed-down Cabinet, consisting of experts, includes ‘super minister’ Corrado Passera, who as Minister of Development, Infrastructure and Transport, is responsible for the crucial area of economic development. Mr Passera is CEO of Italy’s largest retail bank, Intesa Sanpaolo.
Other interesting appointments are Antonio Catricala, Cabinet Undersecretary, who is head of the Antitrust Authority and who is associated with the outgoing Berlusconi government, having held a non-ministerial Cabinet post from 2001-2005; Elsa Fornero, Labour Minister, an economics professor and expert on welfare and pensions; Admiral Giampaolo Di Paola, Defence Minister, who is chairman of Nato’s Military Committee and a former military chief of staff.
Other figures are Paola Severino, the first female Justice Minister, a leading criminal lawyer and deputy dean of Rome’s Luiss University; Terzi di Sant’Agata, Foreign Minister, who is Italy’s Ambassador in Washington; and Andrea Riccardi, Overseas Development Minister, who is the founder of the Catholic Sant’Egidio community, which began caring for the poor in Rome and then became involved in international peacemaking. The latter appointment will go down well with Italy’s Catholic establishment.
Monti’s major task ahead, after clearly putting forward a detailed economic plan, is to be able to implement it. As a non-elected government, Monti and his ministers must make a huge effort to reach out to both Parliament and the public to convince them of their policies for the country and the urgent need for economic reform.
So far, Monti has got off to a good start. He has adopted a non-confrontational tone in all his speeches, thanked his predecessor for the smooth transition to the new administration, enjoys a huge approval rating among the public, and the political parties – with the exception of the right-wing Northern League – say they will support him in Parliament.
In an effort to relate to a major concern of ordinary Italians, the new Prime Minister made it clear that one of his priorities would be to reduce the costs of the Italian political system and all its privileges. This will no doubt prove popular with the voters – for example there are more than 71,000 ‘blue cars’ used by government officials – but whether MPs will vote to have their perks reduced is another matter.
So far it looks like Monti and his ministers are enjoying a brief honeymoon with voters, but time is obviously running out and the markets will want to be reassured that Italy has a stable government that will remain in office until 2013 and is capable of taking drastic decisions.
For now it seems most parties across the political spectrum are supporting Monti, which is good. However, Silvio Berlusconi, whose party is the largest in Parliament, continues to wield considerable influence and is reported to have said that he may “pull the plug” if he does not like what the new administration does.
Monti is going to have to tread very carefully indeed as he attempts to restructure the Italian economy over the next few weeks.