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Can Italy rebound?

14 November 2011

5:50 PM

14 November 2011

5:50 PM

I’m in Italy watching the bonfire of Silvio Berlusconi’s vanities first hand. From the
ashes, most Italians hope a stronger nation will emerge. And for this reason, faith in former EU Commissioner Mario Monti, who gave his first statement to the nation last night, seems high. Italy
is not a nation on its knees, and despite the travails and troubles of the last decade, there is a sense of hope here. People want Italy to succeed and seem willing, for now, to pull together. They
also have a foundation upon which to build: brands, low private debt, and a solid banking system. Crucially, President Giorgo Napolitano has also indicated that a Monti administration will have at
least until April 2012, and possibly longer, to introduce reforms.

But the political classes are jockeying furiously to preserve their power and patronage. Every day, I’m told, somebody nobbles the PM-in-waiting to suggest this or that person for this or that
ministerial office. In Rome, there is great fear that Milan will take over – that all of Professor Monti’s contacts from Bocconi University and the Bourse in Milan will descend upon Rome,
squeezing out the established powerbrokers.


And so they are fighting back. The threat of an early election seems exaggerated – both PdL and the Lega Nord know they would be slaughtered – but a new government will have to rely on
their votes in parliament – alongside those of the left-wing DP – so they have some leverage left.

Understandably, all the talk of town is about who will be in the new government and whether Gianfranco Fini (who, along with Pier Casini, is emerging the best from the crisis) can retain his role
as Speaker of the Lower House.

The real question, however, is what kind of reforms a Monti government will be able to push through. There seem to be two schools of thought. One is counselling a blitz of reforms, set off early to
calm the markets and restore trust in Italy. The other is arguing for a slower but more fundamental set of reforms. Rumour has it that Monti is even planning to do what Guilano Amato did when he
came to power – namely levy an emergency tax on everyone. But these may also have been set off to trip the new PM up.

What’s becoming clear is that Monti has spent months preparing a plan and has given considerable thought to the required reforms. Though he is a convinced free marketer, with an impressive track
record, he is also likely to try to balance taxes on the super-wealthy with labour market liberalisation. ‘Social equity’ is said to be one of his buzzwords. The hopes of not just one nation, but
17 EU nations rests on his ability to push through his plans and the reforms needed. And then organise elections.


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