If one were to pick a movie title to describe Mario Monti, it would surely be A Serious Man. Italy’s current prime minister couldn’t cut a more starkly different ﬁgure from his bigmouth, scandal-prone predecessor. An economics professor and the head of one of Italy’s most prestigious universities before he was tapped to lead the country in November of last year, Monti earned the nickname “Super Mario” for taking on Germany’s powerful regional banks and then Microsoft during his tenure as European Union commissioner for competition in the early 2000s. His time in Brussels proved he was everything that Silvio Berlusconi was not: a man of measured words and bold action.
And he did not disappoint. Less than a month since taking over at Palazzo Chigi, the government headquarters in Rome, Monti had rushed through parliament a draconian, $40-billion austerity plan aimed at eliminating Italy’s public deﬁcit by 2013. He pleased Germany, calmed the markets, and still had well over 50 per cent popular support. Italians saw the pain coming, but simply gritted their teeth.
In Brussels, he received a warm welcome from both Germany’s Angela Merkel and France’s Nicolas Sarkozy—European newspapers were quickly abuzz with rumours that the Franco-German power duo had become a trio. And in some business circles, where France’s president is privately called “Merkel’s fool” for his seeming lack of backbone vis-a-vis the chancellor, people saw in Monti a man who would speak the truth to Europe’s most powerful country. In a September op-ed piece, the professor had pointedly reminded Berlin that it was “none less than Germany and France” that broke the EU’s deﬁcit rules in 2003, “thus sending a ‘don’t worry about ﬁscal discipline’ [message] to Greece and all the others.”
But Rome’s Super Mario still has a long way to go as the game gets tougher. Italians, in fact, may not back him for much longer if the ruthless spending cuts and tax hikes do not bear fruit. “He’s relatively well-liked,” says Andrea Mazza, a 27-year-old elementary schoolteacher from Milan, “but no one voted for him.” And on an emotional level, the measured, seemingly unﬂappable Monti has failed to establish a connection with much of the electorate: a popular impression by an Italian comedian portrays him as a robot in human clothing.
The fundamental dividend that Monti needs to be able to deliver is lower interest rates on Italy’s debt, says Ferdinando Giugliano, until recently a lecturer of economics at the University of Oxford’s Pembroke College and the author of several op-ed pieces on Monti and Italy in the Italian and British press. Though benchmark yields on Italian sovereign bonds had gone down right after Monti took charge, they later climbed back up to the dangerously high levels—around seven per cent—seen during the last weeks of Berlusconi’s government. The catch, however, is that there isn’t much more Monti can do to bring down bond yields.
“Italy is suffering from a Europe risk now,” says Giugliano, who was set to take on a role as a journalist at the British daily the Financial Times when he spoke to Maclean’s. More and more investors are becoming concerned that spending cuts and tax hikes, the main focus of Brussels’ response to the eurozone crisis, are becoming counterproductive. If ﬁscal restraint isn’t balanced out by GDP-boosting measures, it may well stiﬂe growth, making it difﬁcult for heavily indebted countries to keep repaying bondholders, even as public spending shrinks. That view was, in part, the reason why credit rating agency Standard and Poor’s downgraded France and eight other European countries, as well as the eurozone bailout fund, last week. “We believe that a reform process based on a pillar of ﬁscal austerity alone risks becoming self-defeating,” S&P wrote in a statement detailing its decision to downgrade.
Italy’s prime minister has been vocal about the need for Berlin, Europe’s loudest advocate of belt-tightening, to shift its focus from EU treaties that add budget controls and penalties for the rule-breakers toward assistance for sputtering debtor countries. “I cannot have success with my policies if the EU’s policies don’t change,” he told the German weekly Die Welt. So far, however, he hasn’t swayed Merkel.
At home, without ﬁscal resources to stimulate domestic demand, all Monti can do is shake up the supply side of the economy by reforming the labour market. Last week, his government approved a decree meant to restore productivity growth by opening overly protected sectors of the economy to competition, among other things. Though it will take time for those measures to translate into GDP numbers, they may yet turn into political support for Monti. Admittedly, special interests threatened by the prime minister’s reforms have lashed out against the government. But there is one vast constituency that may like what Monti has in mind: Italy’s twenty- and thirtysomethings, whom trade unions have largely ignored. Mazza, the schoolteacher, is on his third one-year contract. He has no beneﬁts, and must resort to temp jobs during the summer to ensure he has an income when school is out. But “trade unions,” he says, “never took an interest in me.” Though he’s a centre-left voter who wants organized labour to stay, he sees a need for “fundamental change.”
Hopefully, Super Mario will be able to deliver.