The upcoming departure of Mario Monti, Italy’s unelected “technocratic” prime minister, will be mourned by the Berlusconi-obsessed Economist and the rest of the europhile claque, but the Daily Telegraph’s Ambrose Evans Pritchard is shedding no tears. He lists a few of the assets that Italy has at hand:
It scores top of the International Monetary Fund’s index for “long-term debt sustainability” among key industrial nations, precisely because it reformed the pension structure long ago under Silvio Berlusconi. “They have a vibrant export sector, and a primary surplus. If there is any country in EMU that would benefit from leaving the euro and restoring competitiveness, it is obviously Italy,” said Andrew Roberts from RBS.
“The numbers are staring them in the face. We think the story of 2013 is not about countries being forced to leave EMU but whether they choose to leave.”
A “game theory” study by Bank of America concluded that Italy would gain more than other EMU members from breaking free and restoring sovereign control over its policy levers. Its International Investment Position is near balance, in stark contrast to Spain and Portugal (both in deficit by more than 90pc of GDP). Its primary surplus implies it can leave EMU at any moment it wishes without facing a funding crisis. A high savings rate means that any interest rate shock after returning to the lira would mostly flow back into the economy through higher payments to Italian bondholders – and it is often forgotten that Italy’s “real” rates were much lower under the Banca d’Italia. Rome holds a clutch of trump cards. The one great obstacle is premier Mario Monti, installed at the head of a technocrat team in the November Putsch of 2011 by German Chancellor Angela Merkel and the European Central Bank – to the applause of Europe’s media and political class. Mr Monti may be one of Europe’s great gentlemen but he is also a high priest of the EU Project and a key author of Italy’s euro membership. The sooner he goes, the sooner Italy can halt the slide into chronic depression.
Ponder that for a second. Monti was “a key author of Italy’s euro membership”. That alone ought to disqualify this quiet and clever fanatic from office. He is an arsonist, not a fireman, a vandal, not a builder. Nevertheless, his time in office has offered international investors the illusion of stability, and the reality of quick profits. They are now nervously contemplating the prospects of his departure.
Well, argues, Evans-Pritchard, too bad.
The interests of Italian democracy and foreign creditors are no longer aligned. The 1930s deflation policies imposed by Berlin and Brussels have pushed the country into a Grecian vortex. The business lobby Confindustria said the nation is being reduced to “social rubble”.
Indeed it is (read the full article for details). But the prospects of an Italian uscita remain, for now, remote, despite the devastation that the Monti-supported ‘one size fits all’ currency has inflicted upon the country. There’s always the instinct to keep a-hold of Nurse/For fear of finding something worse, and, whatever the rhetoric, that view is still likely to win out for now.
Nevertheless, keep an eye on how Italy’s election campaign evolves and, for that matter, on any revived flow of money out of the banks…