Italy’s unelected Prime Minister Mario Monti said he won’t serve in another government when his term ends next year.
“I have always excluded and I still exclude considering an experience of government that goes beyond the next election, which is naturally the end of the government that I have the honor of presiding over,” he told reporters in Brussels today after a meeting of finance ministers.
Monti made the comments after speculation in the Italian press about the possibility that the premier would be asked to remain in office after elections due in April of next year. The nation’s two main political parties, which suspended their rivalries and have jointly supported Monti’s policies, may not be able to win a governing majority in parliament on their own, polls indicate.
Italy’s 10-year bond pared some of its early gains after Monti’s remarks, with the yield at 5.957 percent at 5:30 p.m., after falling as low as 5.54 percent earlier.
“While this is not an unexpected decision, it will not be received well in the markets,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy, a London-based firm specializing in sovereign-credit risk. “Politics is key to the Italian credit story in the minds of most investors. If there has been a ‘game-changer’ since Italy got sucked into the euro- zone crisis, it has been the appointment of Mr. Monti as premier.”
Monti was appointed as prime minister in November to replace Silvio Berlusconi and within weeks passed 20 billion euros ($24.6 billion) in austerity measures, overhauled the pension system and embarked on changing labor market rules. The measures aimed at balancing the budget, reviving the economy and containing the debt, deepened the recession and led to a drop in support for Monti and his allies.
Monti’s popularity fell last month to an all-time low of 33 percent, less than half the level when he was appointed in November, polling company SWG said on June 15.
Backing for the Democratic Party declined and support for Berlusconi’s People of Liberty Party dropped to the lowest since his first electoral victory in 1994, according to SWG.
The governing coalition, which collectively rated more than 77 percent in polls in November, is down to 48.5 percent, the Trieste, Italy-based research company said.
Monti’s efforts to shore up Italy’s finances initially led to a plunge in the 10-year bond yield from more than 7 percent when he took power to less than 5 percent in March. Those yields began rising again in May as Spain moved closer to its June 9 aid request dragging down Italian bonds. Italy’s 10-year yield closed above 6 percent yesterday.
Monti has been lobbying European partners to agree to a plan to use the region’s bailout fund to buy the bonds of countries meeting their fiscal goals to help bring down yields. Today he did not rule out Italy making such a request should yields not come down despite his efforts to balance the budget and overhaul the economy.
“What Italy has wanted to propose, thinking about itself but available for any country that might need it, is a mechanism to intervene whether in the primary market or the secondary market, which remains to be defined, by buying bonds issued by a certain country in order to contain the fluctuations in the spread,” he said.
Monti said he was confident that Italy wouldn’t follow Greece, Portugal and Ireland in asking for a full bailout, “though Italy “could be interested, as could other countries, in an intervention of the other type.”
Nobel Prize-winning economist Robert Mundell said in a July 4 interview that Monti should stay in power after next year’s elections as his international prestige can benefit the country saddled with the euro region’s second-largest debt of more than 120 percent of gross domestic product.
“Although he is not a magician, he is probably going to be the best next thing for Italy politically,” Mundell said. “Continuation of Monti is probably better than any of the political alternatives at the moment.”
Monti said today that after the elections he will remain a member of the Italian parliament as a senator-for-life.
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