Italy's Strategic Shift
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Italian
Prime Minister Mario Monti and French President Francois Hollande are meeting
in Italy on Thursday. The meeting, during which the leaders will look to
coordinate their countries' positions before the European summits later this
month, will allow Italy to move forward with a strategic shift Rome has been
developing over the past several weeks.
Monti
came to power in Italy in November 2011, following months of political
instability and institutional paralysis that preceded the resignation of
former Prime Minister Silvio Berlusconi. Monti and Berlusconi could not be
more different. Monti is a former university rector and economics professor
who is fluent in English, while Berlusconi consistently made headlines for
his tumultuous private life and corruption scandals.
Monti,
a former EU Commissioner, holds a northern European view that promotes fiscal
prudence and institutional reform. His technocratic government implemented
multiple reforms, including spending cuts and tax increases, in the wake of
the political crisis that followed Berlusconi's fall. Those initial reforms
were short-lived, though. After a few months of calm, Italian political life
regained its usual turbulence.
Fights
among pro-government political parties weakened Monti's reformist efforts,
while the resistance of politically influential unions forced the government
to make concessions, most notably on labor law reform. As a result, Italy has
struggled to proceed with recent reform proposals.
Monti's
domestic constraints are not limited to Parliament or the unions. Italian
society is tiring of austerity measures, as shown by the sharp decline in
recent weeks of the government's popularity. The center-left's victory in
local elections in May and the growth of anti-system parties has put Rome on
alert. Protests and instances of anarchist violence reveal that social unrest
is growing in Italy.
The
country is also facing pressure from international markets. After the Spanish
bank bailout failed to bring the expected relief to markets, Monti -- as well
as German and French officials -- quickly declared that Italy did not require
a bailout. Italy has been relatively successful at reducing its deficit, but
the country still holds Europe's second-largest debt-to-GDP ratio at 120
percent (surpassed only by Greece), and has been struggling with high bond
yields for most of 2012.
The
pressures and limits that Monti is dealing with come during a unique moment
for Europe. Hollande's victory in the French elections weakened both
Germany's position and Franco-German unity. Many troubled countries in the
south of the Continent supported Hollande's push for what they call growth
measures -- most of which involve the transfer of funds from the center to
the periphery of Europe.
Spain
openly supported Hollande's proposals, and now France is looking for Italy's
political backing. Before meeting with Hollande, Monti called on the European
Union to come up with a credible plan to stimulate growth. He even mentioned
the need for eurobonds, a proposal that has so far been rejected by Germany
and other northern European countries.
The
constraints at home and abroad are forcing Italy to rethink its position in
Europe. Monti tried to balance Rome's position between core and peripheral
European countries, but political calculations and economic needs are
generally stronger than personal inclinations. In the current financial
crisis, Italy's geopolitical interests draw it closer to the periphery.
For
Italy, austerity and fiscal discipline alone cannot alleviate the crisis.
Rome knows that it needs external assistance, and such assistance can only
come in the form of subsidies and transfers from Europe's core. When he first
came to power, Monti generated enthusiasm in Europe for his technical profile
and his proposals for institutional reform guided by Germany. But economic
reality and political constraints forced Italy to slow down the process of
reform. This same trend is affecting countries across the continent, as other
reformist governments -- most notably that of Prime Minister Mariano Rajoy in
Spain -- are forced to adapt their actions to the limits imposed by domestic
and international pressure. To a great extent, the strategies of European
countries are determined by their circumstances, and not completely by their
political leaders.
Monti
may personally agree with Germany's plan for managing the financial crisis,
but individuals can rarely change the strategic orientation of a country. The
European crisis has shown that most of the time, governments move out of
necessity and within specific limits, and sometimes they have to deal with
events beyond their control. Ultimately, constraints prove more powerful than
individuals when shaping the direction of a nation.
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