Crisi europea

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.”