With
Clock Ticking, an Economist Accepts a
Mandate to Rescue Italy
By
Rachel Donadio
New
York Times, November 13, 2011
Rome.–
Mario Monti, a former member of the European Commission,
conditionally accepted a mandate on Sunday to form a new
government in Italy whose main task will be to keep the
country from being dragged under by Europe’s debt crisis.
Mr.
Monti, 68, a respected economist who has promised to be a
steady hand in a time of market turbulence, said he expected
to move ahead as soon as he secured a parliamentary majority
for the new government.
Assembling
a majority usually requires days or weeks of talks, but Italy
does not have the luxury of time. Skeptical investors have
pushed the country’s borrowing costs to dangerous heights,
putting at risk the euro currency that 17 nations share. The
crisis forced the resignation of Prime Minister Silvio
Berlusconi on Saturday, turning Italy’s most complex
political shift in nearly two decades into one of its most
urgent transitions.
President
Giorgio Napolitano, who as the head of state must approve the
formation of a new government, gave a tough speech on Sunday
aimed at reassuring investors about Italy’s commitment to
the euro and warning the nation’s insular political class
about the stakes involved. He called on lawmakers to form a
broad coalition in support of Mr. Monti that would be able to
push through urgent economic measures.
News
media reports said that Mr. Monti initially sought to include
figures from the major parties in his cabinet in an effort to
share the political cost of the government’s program,
including unpopular austerity measures. But while most major
parties were prepared to back his government, few were willing
to join it. The new cabinet is now expected to consist mainly
of technical experts rather than politicians.
Mr.
Napolitano, who met with leaders from across the political
spectrum on Sunday to gather pledges of support, said in his
speech that “it is a responsibility we perceive from the
entire international community to protect the stability of the
single currency as well as the European frame work.” He
added that Italy understood how its actions would affect
“the prospects for the recovery of the world economy.”
Italy
must repay or refinance almost 200 billion euros, about $276
billion, worth of maturing bonds by April 2012. Last week, the
political turmoil drove the effective yields on Italy’s
bonds to 7.4 percent, a level at which other countries in the
euro zone have sought bailouts. If Italy is forced to continue
to pay such high rates to borrow, it will have difficulty in
handling its debt load, which is among the highest in Europe.
The
president’s remarks were widely seen as directed mainly at
Mr. Berlusconi’s political party, the People of Liberty,
which said earlier on Sunday that it would accept a Monti
government, but only for a limited time before going to early
elections.
Angelino
Alfano, the secretary of the People of Liberty and Mr.
Berlusconi’s political heir apparent, acknowledged on
national television on Sunday that there was opposition to a
Monti government within his party. But he confirmed that the
party would back Mr. Monti if certain conditions were met
concerning the composition of the cabinet and the how long the
government would last before elections.
Mr.
Monti declined to say how long he hoped to govern. News media
reports suggested that he was aiming to remain in office until
the end of the current legislature’s term in 2013. Mr. Monti
said he would act “with a sense of urgency, but also with
care” in forming a new government; he is expected to present
his cabinet and program to Parliament in a few days.
As
for his broad goals, he said his government would try to
restore the country to financial health and growth without
compromising “social equity.”
“We
owe it to our children to give them a dignified and hopeful
future,” he said.
Not
one to be upstaged, Mr. Berlusconi spoke publicly on Sunday
evening for the first time since his resignation, vowing in a
video that was broadcast on television to redouble his efforts
in Parliament to save the country and the euro.
Pale
and visibly tired, Mr. Berlusconi called his resignation “an
act of generosity” that was carried out with a “sense of
responsibility” for Italy, and he said he had been insulted
by his jeering critics.
He
quoted wistfully from a speech he delivered when he first ran
for office in 1994, praising Italy and its promise of freedom.
“Mine was and remains a declaration of love for Italy,”
Mr. Berlusconi said. “That love remains unchanged.”
In
his video address, Mr. Berlusconi called on the European
Central Bank to expand its role in shoring up the euro,
arguing that the debt crisis extended far beyond Italy.
For
their part, European leaders had come to see Mr. Berlusconi as
a liability both to Italy and to the single currency after his
government repeatedly fell short on promises of fiscal and
economic reform. Mr. Berlusconi resigned after Parliament
finally approved a package of austerity and growth measures
but denied him the majority support he needed to remain in
office.
The
Berlusconi government had been shadowed in recent years by sex
scandals surrounding the prime minister. Mr. Monti attended
Mass with his wife on Sunday morning in the Roman Catholic
Church of Sant’Ivo in the historic center of Rome.
Many
Italians awoke on Sunday to what they felt was a new day in
Italian politics, even if many did not quite believe that Mr.
Berlusconi, a fixture of public life here for nearly two
decades, was really gone. Some young Italians, who
increasingly feel shut out by a labor market that protects
older workers, considered his departure to be good sign.
“We’ve
been following what happened since the summer with growing
concern,” said Laura Calderoni, 36, an architect in Rome.
“The government’s complete immobility, deafness and
incapability to understand reality and act accordingly was
very scary.”
She
added: “We are part of the brain–drain generation, but I
kept on telling all my friends, ‘Don’t flee; it will be
over.’ A fairer country starts with citizens like us that
build their lives here and believe in it.”
Others
said that Italy’s problems did not begin with Mr. Berlusconi
and would not end with Mr. Monti.
“I
just think that Berlusconi is not the root of all our economic
evil,” said Anna Costeri, 43, a dental hygienist from
Sardinia who was visiting Rome and said she had voted for a
right–wing party in the past. Referring to Mr. Monti’s
background, she said, “I am not that hopeful that someone so
close to rating agencies and the banks can do our best
interest.”
Gaia
Pianigiani contributed reporting.
A
version of this article appeared in print on November 14,
2011, on page A4 of the New York edition with the headline:
With Clock Ticking, an Economist Accepts a Mandate to Rescue
Italy.
Man
in the News: Mario Monti
President
of the Italian Group of the Trilateral Commission,
an
“ultra–liberal American, European and Japanese Masonry
inspired by David Rockefeller.”
By
Elisabetta Povoledo
New
York Times, November 13, 2011
Rome.–
In the news media he is known simply as “Super Mario.” But
Mario Monti, the likely leader of Italy’s new government,
which is being formed amid a crisis that threatens the
European monetary union itself, will face a strong challenge
in living up to his admiring nickname as he tries to steer his
country from the brink of economic turmoil and through the
machinations of Italian politics.
The
consensus in Italy is that President Giorgio Napolitano, who
nominated Mr. Monti in record time on Sunday to replace
departing Prime Minister Silvio Berlusconi, had chosen
judiciously, picking an economist with strong European
credentials and longstanding familiarity with Europe’s power
brokers.
It
remains to be seen, however, whether Mr. Monti — who has no
hands–on political experience at home — can convince
financial markets that he can overcome Italy’s snarled
domestic politics and implement the cost–saving measures
that Italy has promised to whittle down a mountain of debt and
boost growth.
“Mr.
Monti brings credibility and legitimacy, but also the notion
that if he fails and his efforts fail, everyone will be worse
off,” said Moisés Naím, a senior associate in the
international economics program at the Carnegie Endowment for
International Peace in Washington, who knows Mr. Monti. “The
bottom line is that Italians have lost their alibi once
Berlusconi is gone and the hard work starts; there are no
excuses any more.”
Mr.
Monti, 68, is as much an outsider to Rome’s political
palazzi as he is at home in Milan, where he taught political
economy and is president of Bocconi University. He is also at
home in Brussels, where he spent more than a decade as a
member of the European Commission, first for the internal
market and then for competition.
“He
was really shaped by the two portfolios he held at the
Commission, which are the fundamental pillars of the E.U.,”
said Jean Pisani–Ferry, the director of Bruegel, an
economics research institute in Brussels. Mr. Monti was
Bruegel’s first chairman and is now its honorary president.
Mr.
Monti’s tenure as commissioner for competition coincided
with an eventful time in European Union antitrust enforcement
and control of market concentrations. He also worked with
United States authorities to create the International
Competition Network.
He
blocked the $42 billion merger of General Electric and
Honeywell and fined Microsoft $650 million for antitrust
violations. He also ordered seven German regional public banks
to repay more than 3 billion euro in illegal subsidies they
received from their regional governments in the 1990s.
“He
was not afraid to take on iconic businesspeople like Jack
Welch,” General Electric’s former chief executive, said
Nicholas Levy, an antitrust lawyer at Cleary Gottlieb Steen
& Hamilton, who dealt with Mr. Monti on several occasions,
and remembered him as “extraordinarily courteous, and a good
listener who approached his job with care for the subject
matter,” paying attention to details and understanding the
facts.
After
the General Electric decision, The Economist magazine
published an article saying, “Many American businessmen have
regarded Mario Monti as the corporate equivalent of Saddam
Hussein.”
A
series of court rulings overturned three of Mr. Monti’s
other merger decisions, but his response, Mr. Levy said,
“served as a catalyst for change, and formed the basis of
his legacy.” He enlisted the help of economists as well as
lawyers to help shape the regulations to guide the competition
commission.
Italians
can expect Mr. Monti to act in support of market integration,
which he believes will make Italy — and the European Union
— more resilient to crises. “He holds that the monetary
union has to be based on market integration, openly competing
within the euro single market,” Mr. Pisani–Ferry said.
They
can also expect Mr. Monti to push for the reform–minded
agenda demanded by the International Monetary Fund, the
European Commission and the European Central Bank to make
Italy more competitive, and spur the growth that has eluded it
in the past decade. Those reforms would include enforcing —
and possibly strengthening — measures passed by the Italian
Parliament on Saturday that aim to eliminate some structural
obstacles to Italian competitiveness, like cumbersome red tape
or its entrenched professional guilds.
Though
his last official post in Brussels dates to 2004, he remains
linked to the city through various organizations like Bruegel,
and the Reflection Group, which was established by the
European Council to examine long–term issues facing the
European Union.
Two
years ago he wrote a report for the commission’s president
on the European Union’s single market and options for
stimulating growth. “I think very few of the other prime
ministers have the same degree of commitment to Europe that he
has,” Mr. Pisani–Ferry said. “He’s a strong believer
in Europe; for him it’s a matter of principle, not a matter
of expediency.”
And
his contacts guarantee that he can count on the counsel of
players who count in Europe’s major institutions.
On
Saturday morning, Mr. Monti met with the new president of the
European Central Bank, Mario Draghi.
The
bank, first under Jean–Claude Trichet and now Mr. Draghi,
has worked to keep the crisis over the euro from damaging
Italy too deeply. It has bought the country’s bonds in a bid
to keep Italy’s interest rates below levels that forced
Greece, Portugal and Ireland to seek bailouts.
Mr.
Monti was born in Varese, the son of a banker. He studied
economics and business at Bocconi, and later did graduate work
at Yale University, where he studied under James Tobin, the
Nobel Prize–winning economist who called for the taxation of
foreign currency transactions.
In
Milan, besides staking his place at the heart of one of
Italy’s most respected universities, he sat on the board of
several Italian companies.
Recent
newspaper articles described Mr. Monti as being as
self–effacing as Mr. Berlusconi was flamboyant.
“He’s
got a statesmanlike grace that is reassuring in a way that few
politicians have,” Mr. Levy said.
Mr.
Monti is also an international adviser to Goldman Sachs, and
was president of the Italian Group of the Trilateral
Commission, an organization described in his blog by
Piergiorgio Odifreddi, an Italian mathematician and writer, as
“ultra–liberal American, European and Japanese Masonry
inspired by David Rockefeller.”
Some
in the Italian news media have begun referring this week to
the dawn of an era of “Government Sachs.” Like Mr. Monti,
Mr. Draghi worked for the global investment bank, as did
Greece’s new prime minister, Lucas Papademos.
“I
see Monti and his team knowing what needs to be done,” said
Mr. Naím of the Carnegie Endowment. “Italy is the most
overdiagnosed country in the world.”
But
if the diagnosis is straightforward, a cure may be less so.
“No one wants to bear the costs of the reforms,” Mr. Naím
said. “He will have to be a hell of a politician to pull off
measures that are needed. And politicians will have to make
similar decisions.”
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