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.