In November 2011, Italy feared that its political time had run out if it was to avert bankruptcy. So it called an economist to form a technocratic government. This, by definition, would seek to apply scientific method to solving problems.
Mario Monti, twice a former European Commissioner, first for with the Internal Market brief, then Competition, faced having to reduce Italy’s borrowing costs, which had grown dangerously – to nearly 7%.
This level, the week before he stepped in, had forced a bailout of Portugal, Ireland and Greece.
Having replaced Berlusconi, Monti rang in a 20-billion euro spending strip-down.
He said with these measures: “We have also thought of the need to create conditions for growth in Italy.”
Budget cuts would run in tandem with higher taxes. One of the hardest reforms to convince Italians of was for their pensions. It even moved the Minister of Social Affairs to tears as she announced the measures. She choked on a word.
Monti said: “I believe she meant to say ‘sacrifice’, as you have understood.”
Minimum retirement age would be raised a year for men, to 66, and another for women, to 62 – then for them also, in 2018, to 66. The time span during which people paid into state pensions was raised from 40 to 42 years for men and to 41 for women.
Labour reforms increased taxes linked to companies’ fixed term contracts, to encourage permanent hiring; rules on firing were relaxed for employers, though judges’ powers to rule in labour disputes were reinforced.
Unemployment was at a record high. Italians spat at the medicine being prescribed. Growth had been stagnating for years and the country was staring at five consecutive quarters of economic retraction.
Monti’s popularity rating suffered with a majority of Italians. Today only ten percent say they would vote for him, and 60 percent are against his running for elected office.
The technocrat was rumoured to be considering entering politics, even with the embittered public opinion of him over his austerity policies.
That’s when his predecessor Silvio Berlusconi re-surfaced, saying he would be a candidate in the legislative elections once again, withdrawing his People of Freedom party’s support for the Monti government.
The stage was set for the duel of the salesman and the professor now, as many people characterised them, where the only backing for Monti seemed to come from the markets and European partners.