Monti’s mission hanging on a thread

“Markets slump, spread skyrockets”: La Stampa resumes Tuesday’s financial scare which saw stocks plunge all across Europe. Italy was at the crest of the panic wave, with Milan losing almost 5 per cent and the spread between its bonds and Germany’s benchmark bund crossing the 400 point threshold, with Italian 10-year bonds selling at 5.66% against the latter’s 1.65%.

PM Mario Monti attempted to dispel fears and blamed Spain’s enduring economic troubles and weak international growth. According to the Turin daily, he has also privately lashed out at the Italian entrepreneurs’ association, which has shaken the government by criticising its labour reform for being too watered down and compliant to trade union demands. Writing in La Stampa, Bill Emmot, former editor in chief of The Economist, says -

It would be wrong to pay too much attention to daily or weekly market movements, as they have more to do with animal psychology. [...] But behind them lies a substantial truth: neither Europe nor Italy’s sovereign debt problems have been solved. If recession in Italy or Spain is slightly worst than expected, they will fall short of their deficit reduction targets. That will call into question the issue of political will. [...] Monti’s reforms have been huge compared to those of previous governments, but not are not adequate to the task he faces. He started a modest liberalisation program, gave a mild stimulus to the forces of competitivity, and launched a labour reform that will not make history. No bond buyer could get the feeling that Italy’s growth perspectives have been radically transformed.

Receive the best of European journalism straight to your inbox every Thursday

You can unsubscribe at anytime *

Subscribe