Bloomberg News

Monti Praised by Merkel Favored Less by Taxed Italians

December 21, 2012

Monti Praised by Merkel Plots Future

Mario Monti, seen here as Italy's prime minister shakes hands with Angela Merkel, Germany's chancellor in Rome, Italy, on July 4, 2012. While Monti’s rule has been praised by Merkel and other European leaders, his policies find less favor at home. Photographer: Alessia Pierdomenico/Bloomberg

European leaders have praised outgoing Italian Prime Minister Mario Monti and encouraged him to run in next year’s elections. Italians are less enthusiastic.

Monti, who may resign as soon as today after 13 months in office, would win at most 20 percent of votes in elections expected on Feb. 24, said Maurizio Pessato, vice-president of polling company SWG SpA. Sixty-one percent don’t even want him to run, a Dec. 14 poll by SWG showed.

“Monti has managed to get policies pushed through because he was seen as ‘super partes,’” said Pessato, using the Latin term for above the political fray. “If he chooses to run, then he has to choose his ‘partes.’”

Monti took over last year just as Italy risked becoming the next victim of Europe’s debt crisis under former Premier Silvio Berlusconi. While he’s overseen a recovery in Italy’s bonds and repaired its standing abroad, his austerity steps left Italians with higher taxes, rising unemployment and a shrinking economy.

A former European Union competition commissioner, Monti announced his intention to quit on Dec. 8 after Berlusconi’s People of Liberty party withdrew support for his Cabinet of unelected technocrats. Monti, 69, has said he would step down after the 2013 budget is given final approval by the lower house, which is expected today. He may resign later today after a cabinet meeting scheduled 7 p.m., Ansa news agency said.

Complacent Market

“The market is complacent about the risks attached to the elections because it is buying into the idea that the ECB can do whatever it wants,” Nicola Marinelli, who oversees $180 million at Glendevon King Asset Management in London, said in a phone interview on Dec. 18. A five-year government with strong backing for reforms is needed and “I don’t see how you can get that from a coalition.”

The yield on Italy’s 10-year bond, which surged to 7.26 percent on Nov. 25 last year, past the level that had prompted Ireland, Greece and Portugal to seek bailouts, rose 7.6 basis points to 4.5 percent at 2:59 p.m. in Rome today. The gap with similar-maturity German bunds was 311 basis points as the European Central Bank’s bond-buying program buoys Italian debt.

After resigning Monti, an economist who’s never sought elected office, would have to decide whether to stand aside or join the fray. He’ll use a year-end news conference, scheduled at 11 a.m. on Dec. 23, to announce plans to run at the head of a coalition of centrist parties, newspaper la Repubblica said yesterday.

Foreign Praise

While Monti’s rule has been praised in recent days by German Chancellor Angela Merkel and other European leaders such as Jean-Claude Juncker, who heads the group of euro-area finance ministers, his policies find less favor at home.

A former adviser to Goldman Sachs Group Inc., Monti imposed 20 billion euros ($26.5 billion) in austerity measures. He raised taxes, cut spending, raised the retirement age and overhauled labor rules to make firing easier. The policies have left Italy on track to cut its deficit within the European Union target of 3 percent of output this year.

They also deepened Italy’s fourth recession since 2001, pushing the jobless rate to a 13-year high of 11.1 percent. The euro-area’s third biggest economy will contract 2.1 percent this year and 0.6 percent in 2013, employer lobby Confindustria forecast on Dec. 11.

Drinking Water

“Monti put out the fire, but he used the water Italians were drinking,” said Giovanni Orsina, a professor at Luiss Guido Carli University in Rome.

A Nov. 17 poll by Datamonitor showed that 62.5 percent of Italians had a negative view of the Monti government, 82.4 percent had little or no confidence in the economy improving, and 81 percent said they had not been able to save in the past three months. The poll questioned 1,000 people. No margin of error was given.

Most polls indicate the Democratic Party led by Pier Luigi Bersani, a former communist, will win the election with about 30 percent of votes. A protest group led by comedian Beppe Grillo, who’s suggested Italy leave the euro, trails with 20 percent ahead of Berlusconi’s PDL party with between 15 and 20 percent.

Monti’s being courted by a group of small parties led by Catholic politician Pier Ferdinando Casini and Luca Cordero di Montezemolo, the Ferrari SpA chairman. Berlusconi has said he’d step aside and endorse Monti if he led a coalition with his PDL and former Northern League ally, but not the Democratic Party.

Possible President

At the same time, Monti’s been mentioned as a possible successor to President Giorgio Napolitano , whose term in the largely ceremonial post ends in May. Bersani said Dec. 13 that he’d like Monti to remain “engaged” in public service after the elections.

The son of a banker from the northern city of Varese, Monti, as EU commissioner, blocked General Electric (GE:US) Co.’s $47 billion takeover of Honeywell International Inc. (HON:US) and levied a 497 million-euro fine against Microsoft.

To contact the reporter on this story: Gregory Viscusi in Paris at gviscusi@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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