Italy’s new prime minister, Mario Monti, had a busy day last Wednesday (18th Jan). He first spoke at the London Stock Exchange (LSE) and later, early evening, he gave a speech at another LSE, this time the London School of Economics.
3000 people had applied for the 400 available tickets to watch Monti speak about Europe’s role in the global economy and his audience massively outnumbered the handful of protesters who were outside, complaining about his government of technocrats.
For a technocrat, Monti is quite an emotional speaker and in slow, but fluent English, he told his audience; “Growth is in our hands” and pledged that the Italian government would do everything they could, “to quickly remove Italy from the list that represents sources of problems and move it to contributors to the solution.”
Italians hoped that getting rid of Berlusconi would save them from the wrath of the markets and bond yields would come down. At first they did fall, but they soon climbed back to the levels they had reached under Berlusconi. Monti said: “Austerity is not enough, even for budgetary discipline, if economic activity does not pick up a decent rate of growth.”
“A lowering of interest rates does not depend only on Italy’s efforts, but also, and essentially, on Europe’s ability to confront the crisis in a more decisive way.”
Recently, European leaders have famously been reluctant to be seen with Italy’s previous disgraced leader, but Monti has been meeting Angela Merkel, Germany’s chancellor, Nicolas Sarkozy , David Cameron and Herman Van Rompuy. He is scheduled to meet up with them again at the European Union summit on the 30th. Italy has been welcomed back to the top table.
Monti said he had a good relationship with Germany and that he saw rays of hope in their policies and their belief that for growth, there needed to be, “effective governance of the eurozone and that growth has to be sustainable.”
Last week, ratings company, Standard and Poor’s downgraded its long-term credit rating on Europe’s rescue fund, from triple-A to double-A-plus and lowered the ratings on nine eurozone countries, including Italy.
Monti said that, obviously, this was not a good thing, since it makes improvement more difficult, but that he had been, “relieved that much of the downgrading was due to a negative evaluation of eurozone governance.” He said that ratings companies had a difficult job and it was easy to criticise them; “The markets have a demand for them and I do not feel vindictive.”
Italians were horrified by their country being engulfed by the eurozone crisis last year, benchmark sovereign-bond yields are around seven percent and the spread between Italian and German debt has frequently topped 500 basis points, which is why Italians have seemed happy to entrust their future to a government of perceived economic experts.
Monti is unclear on how a cap on debt could be imposed, but seems to be in favour of Eurobonds, believing they will also have a place in the longer term. At the end of the speech he was presented with a certificate and a cap, which he wore jauntily and said, “could symbolise a soon to come cap on interest rates.”
While his boss, nicknamed Super Mario, after the cartoon character, was (actually) charming his audience, Monti’s driver, fittingly, was sitting in his black sedan, watching the Simpsons on his iPad.
To watch a podcast of Mario Monti’s presentation to the LSE, click here.