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Italy

Italian prime minister Mario Monti has a ‘Goldilocks’ problem

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One of the enduring questions of the Italian election has been whether outgoing prime minister Mario Monti will run or not.Italy Flag Icon

Given the popularity of his reforms with the European Union leadership generally and with international investors, his return as prime minister after the February elections is by far their top preference.  Any indication that Italy will make a U-turn on its recent reforms could send Italian bond rates skyrocketing back to the 7%-and-climbing levels of November 2011.

Presumably, too, Monti would very much like to return for a longer term as prime minister to see through further reforms, further budget cuts, and be remembered as the ‘grown-up’ prime minister that put Italy on a long-term path for future growth.

But it’s an important question not just for Italy, but for all of Europe, and the U.S. economy as well.

Legally, of course, Monti cannot run for office in his own right because he’s a senator for life’ and thus, is unable run for a seat in Italy’s lower parliamentary house, the Camera dei Deputati (House of Deputies) — but that’s not really an answer as to whether he’s ‘running’ or not.

Over the weekend, Monti sort-of emerged as a candidate for the elections — he said he is ‘willing’ to lead a coalition of small centrist parties, each of which would vote to install Monti as prime minister for a second Monti-led government.  He had harsh words for Silvio Berlusconi, who has returned, despite his massive unpopularity, to lead the conservative Popolo della Libertà (PdL, People of Freedom) by asserting over the weekend that Berlusconi has demonstrated a ‘certain volatility in judgment’ — an incredibly muted criticism, perhaps, but a criticism nonetheless.  He continued his aggressive tone today with respect to Pier Luigi Bersani, who leads a center-left coalition that features the  Partito Democratico (PD, Democratic Party), by urging Bersani to silence the extremists within his own alliance.

It’s an incredibly difficult tightrope walk for Monti, given that the polls show his coalition is set to finish no better than fourth, so the only way he can return as prime minister is through the election of a hung parliament.

Monti must at least provide a pro forma argument for supporting the ‘pro-Monti’ coalition, or he would risk minimizing the number of votes that will go to the ‘Monti coalition’ — without at least some floor of campaign activity from the incumbent prime minister himself, votes will inevitably slip away from the center to the two main center-right and center-left blocs, leading to what polls show would be a clear win for Bersani, not a hung parliament.

If Monti campaigns too hard, however, he risks diminishing his above-the-fray ‘technocratic’ mien.  He’s already done that now, to some degree, by directly engaging his political rivals.  But more fundamentally, if Monti campaigns too hard and voters are seen to have directly rejected Monti, he will have diminished not only his own political capital, but the cause of political reform that’s been his government’s chief aim.  His political rivals will feel even less pressure to continue Italy’s reformist path.  Continue reading Italian prime minister Mario Monti has a ‘Goldilocks’ problem →

Italy

Monti resigns as prime minister in light of Berlusconi’s political return

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It’s been an incredibly fast-moving weekend for Italian politics — shortly after Silvio Berlusconi announced he would return to the leadership of his floundering Popolo della Libertà (PdL, People of Freedom) on Saturday, prime minister Mario Monti announced that he would resign as prime minister upon the completion of Italy’s 2013 budget, meaning that the next Italian election could come sooner than April 2013 as previously planned.

Monti’s resignation is not the incredible bombshell that it seems — it will still take some time to pass the 2013 budget, and the coalition that supports Monti, comprised of the PdL and the center-left Partito Democratico (PD, Democratic Party), seem likely to provide support for that budget.  Earlier today, after the Italian stock market dropped and Italian bond yields crept upwards to around 4.8%, Monti reassured global markets and Italians alike that he would continue to govern through the next election.  Monti was appointed prime minister in November 2011 after Berlusconi’s government found itself in the throes of a crisis of confidence over Italian fiscal policy with bond yields of over 7%, not to mention the corruption and sex scandal that had enveloped Berlusconi in his final years in office.

Monti has spent much of 2012 passing budget cuts, tax increases and market reforms through Italy’s parliament — Monti remains well-respected in Italy, although his austerity measures in particular have become increasingly unpopular.  As such, the upcoming Italian election was always going to determine the outcome of Monti’s reforms, and it will fall to the next government to consolidate and continue Monti’s reforms.  Indeed, Italy had already started turning toward election season, and although Monti is not running in his own right, he has indicated he could return to lead a second Monti government in the event, not unlikely, of a hung Italian parliament.

The PD, together with a handful of smaller leftist allies, selected just eight days ago the broad center-left’s candidate for prime minister, the PD’s current leader, Pier Luigi Bersani, in a race that saw much of Italy cheering on the youthful, energetic mayor of Florence, Matteo Renzi.  Although Bersani has emphasized the importance of stimulating economic growth and creating more jobs, he’s largely indicated he would continue Monti’s broad path of fiscal readjustment.

Earlier in November, a handful of business leaders formed a new coalition, Verso la Terza Repubblica (VTR, Toward the Third Republic), a centrist group that will run in the 2013 election for the express purpose of returning Monti to government.  Its leaders include Ferrari CEO, former Fiat CEO and former president of Confindustria (Italy’s employer’s federation), Luca Cordero di Montezemolo.  A handful of smaller parties are also contesting the election in their own right, ranging from autonomist parties in Italy’s north and Italy’s south, the remnants of Italy’s old Christian Democrats, and parties ranging from fervently communist to nearly neofascist.

So, at most, Monti’s imminent resignation will accelerate the Italian election to February.

In one sense, that’s good news for Berlusconi’s opponents — the less time that Berlusconi has, with his ample amount of money and media power, to attack Monti’s reforms and his leftist opponents, the less likely it is that Berlusconi can turn around polls that show the PdL in third place, behind the PD and behind blogger Beppe Grillo’s anti-austerity Movimento 5 Stelle (M5S, the Five Star Movement).

On the other hand, the PdL was set to contest regional elections on February 10 and 11 in Lombardia (in northern Italy and home to Italy’s financial and fashion capital, Milan) and in Lazio (in central Italy and the region surrounding Italy’s capital, Rome), and losses in those elections could have been even more embarrassing in advance of a later spring vote.  In Lombardia, Roberto Formigoni, who has served as regional president since 1995, announced the dissolution of the regional legislature after one of his PdL allies was arrested on the charge that he bought votes from the southern organized crime organization ‘Ndrangheta in the 2010 regional elections.  In Lazio, the PdL’s Renata Polverini resigned as regional president after just three years in office after being implicated in a public expenses scandal.