I have written an analysis of the implications of Italy’s Mario Monti decision to run for premiership at the next general elections in February 2013. The article, published by Al Jazeera English, also includes a review of the rather poor performance of Monti’s incumbent government. Click here to read it.
I paste below some extracts:
“[Monti’s] government did nothing to alleviate the lending crisis that started in 2008 and negatively affects many productive SMEs that desperately need credit to keep afloat. Italian banks preferred to use massive injections of liquidity from the European Central Bank to buy Italian bonds. This contributed to keep national borrowing costs low during Monti’s tenure but had no direct positive effects on the real economy.
The other reforms approved by the parliament in 2012 look more like the half-baked measures introduced by previous governments than the required structural reforms initially announced by Monti. … Each reform announced by the technocratic cabinet was diluted by strenuous negotiations with political parties, professional and employers’ associations, trade unions and other corporatist interests. The drawn out process of parliamentary approvals further weakened the proposed measures. Amendments at the hand of parliamentary committees finally succeeded in neutralising any prospect for real change.”
“What is the solution to this impasse? To legitimise the Monti Agenda – a 25 page programme available on the internet – through the democratic process. A coalition of centrist parties, business interests and civil society movements have now endorsed the agenda as their political programme in the next general elections. Technocracy cannot succeed where politics failed.
European political elites and the international financial world see Monti’s transformation into a frontline politician as a viable solution to reassure markets that Italy will not default on its national debt repayments, and will undertake the structural reforms indicated by EU technocrats.”
“There are two major factors that will work against the effective implementation of Monti’s programme. For one, Monti is likely to encounter the same internal obstacles that undermined the efforts of his first government. The main resistance to change will come from the very system he is now endorsing by running for premiership: that complex web of vested interests represented by political parties and other social blocs, in particular professional associations, industrialists and trade unions. Their basic political instinct is to oppose any significant alteration of the status quo. …
The other reason has to do with basic macroeconomics. Monti is proposing high-reaching targets on debt reduction … This would only be possible with high growth, coupled by painful cuts in public spending. The rationale of Monti’s proposals is not so different from Cameron’s austerity programme in the UK: free up the market, reduce the weight of government and let the economy adjust itself. But the prospects for the global economy, especially the eurozone, look grim. European economies will grow slowly, if at all, for many years to come. Italy has struggled with low growth rates for the last two decades. Why should we believe that wide-ranging Thatcher-style market reforms will stimulate high growth in such a conjuncture?”