Leading article: The eurozone will not survive if Mr Monti fails

 

Share
Related Topics

Is Mario Monti a good sleeper? We must hope so because he will need his wits about him in the coming months as he takes up the Herculean task of restoring confidence in Italy's stricken economy. It is no exaggeration to say that the challenges he faces are greater than any government in Rome has met since the fall of Fascism. In some ways they are greater, because in 1945, Italy's new government had only to draw a line under the Mussolini era and start afresh. Mr Monti does not have that option. The legacy of Silvio Berlusconi's disastrous handling of the nation's finances and the climate of corruption that he fostered during almost two decades in power will weigh on him throughout his time in office. At stake is not only the health of the Italian economy but the future of the eurozone.

The Prime Minister's immediate task is to follow through on the cost-cutting reforms that parliament adopted in the dying hours of the Berlusconi government. But this will not be enough even to begin to solve Italy's financial crisis. The package of reforms is welcome and overdue, but on its own it won't significantly relieve the burden of debt, now standing at 1.9 trillion euros, the size of which has worried the markets and raised concerns that the eurozone's third largest economy could default. Other tough measures must follow, possibly including a one-off, so-called "overnight tax" on every Italian household.

Beyond that, Mr Monti's bigger task is to recapture for Italy the elusive phenomenon of market confidence. Investors have to believe that he has the vision and the determination to undertake what no Italian government has attempted since the war, possibly since unification in the 1860s, which is to fundamentally change the way that Italy operates.

Hard though it may be to recall now, when Mr Berlusconi took office 18 years ago he promised sweeping changes: a more open, transparent economy and a society that rewarded hard work and initiative over bloodlines and connections to vested interests. What Italy got was more of the same old bad practices, only worse, resulting in stagnation, brain drain and growth in the debt mountain.

For now, the auguries for Mr Monti look good. The former European Commissioner may suffer from what is called a democratic deficit, having never been elected to public office. But in the eyes of the markets and of many Italians, his distance from Italy's tarnished and corrupt political scene counts as a plus. As soon as he was sworn in as prime minister, interest rates on debt fell below the level of 7 per cent, the rate seen as unsustainable for more than a few weeks without pushing the country towards default.

But no one should be deceived into imagining that Italy has already turned a corner. This is just the honeymoon period, while the jury is out and while markets weigh up whether they believe that Mr Monti can deliver. If they detect any loss of resolve and momentum, interest rates will climb again, once more crossing the threshold of 7 per cent. In that case, alarm bells will be ringing all across Europe for the simple reason that, as has often been said, the Italian economy is too big to rescue. No financial firewall currently exists to guarantee debts as large as Italy's, so a default might then be unstoppable, inflicting such damage to those banks in neighbouring countries that are most exposed to Italian debt that the single currency could not survive the shock.

We in Britain would not be safe from such an alarming eventuality. The eurozone takes almost half our exports, so our economic fates are almost interlocked. For this reason the success of Mr Monti's government is not some remote, academic question. To a significant degree, Britain's own future hopes of prosperity depend on it.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Recruitment Genius: Massage Therapist / Sports Therapist / Physio / Osteopath

£12000 - £24000 per annum: Recruitment Genius: An opportunity has arisen for o...

Recruitment Genius: Account Manager / Sales Executive - Contract Hire

£35000 - £60000 per annum: Recruitment Genius: This industry leader provides c...

Recruitment Genius: Project Coordinator

£28000 - £30000 per annum: Recruitment Genius: A Project Coordinator is requir...

Recruitment Genius: Area Sales Manager - Midlands

£20000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Day In a Page

Read Next
 

Don’t pity me for eating alone, just give me a better table

Rosie Millard
Aerial view of planned third runway at Heathrow  

Heathrow expansion: This final 'conclusion' has simply fanned the airport flames

Chris Blackhurst
John Palmer: 'Goldfinger' of British crime was murdered, say police

Murder of the Brink’s-MAT mastermind

'Goldfinger' of British crime's life ended in a blaze of bullets, say police
Forget little green men - aliens will look like humans, says Cambridge University evolution expert

Forget little green men

Leading evolutionary biologist says aliens will look like humans
The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

The Real Stories of Migrant Britain

An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

Dying dream of Doctor Death

Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy
UK heatwave: Temperature reaches 39.8 degrees on Central Line - the sweatiest place in London

39.8 degrees recorded on Tube

There's hot (London) and too damn hot (the Underground). Simon Usborne braved the Central line to discover what its passengers suffer
Kitchens go hi-tech: From robot chefs to recipe-shopping apps, computerised cooking is coming

Computerised cooking is coming

From apps that automatically make shopping lists from your recipe books to smart ovens and robot chefs, Kevin Maney rounds up innovations to make your mouth water
Jessie Cave interview: The Harry Potter star has published a feminist collection of cartoons

Jessie Cave's feminist cartoons

The Harry Potter star tells Alice Jones how a one-night stand changed her life
Football Beyond Borders: Even the most distruptive pupils score at homework club

Education: Football Beyond Borders

Add football to an after-school homework club, and even the naughtiest boys can score
10 best barbecue books

Fire up the barbie: 10 best barbecue books

We've got Bibles to get you grilling and smoking like a true south American pro
Wimbledon 2015: Nick Bollettieri - Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power

Nick Bollettieri's Wimbledon Files

Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power
Ron Dennis exclusive: ‘This is one of the best McLaren teams ever – we are going to do it’

‘This is one of the best McLaren teams ever – we are going to do it’

Ron Dennis shrugs off a poor start to the season in an exclusive interview, and says the glory days will come back
Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Cheaper energy on the way, but it's not all sunshine and rainbows

Cheaper energy on the way, but it's not all sunshine and rainbows

Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most