IT IS just over a year since the technocratic Mario Monti took over from the clownish Silvio Berlusconi as prime minister of Italy. He has accomplished much. The public finances look a lot healthier, ten-year bond yields are at two-year lows and structural reforms to the economy have at least been started. Above all, Mr Monti has persuaded Europe and the world to take Italy seriously once again.
Yet now the world is starting to worry anew. A general election is due to be held next March. On the basis of current polls, the left looks likely to win, so Mr Monti’s most probable successor is the Democratic Party’s candidate, Pier Luigi Bersani. Having served in four previous centre-left governments, Mr Bersani has plenty of political experience. But sustaining Italy’s recent economic progress will be difficult.
That is partly because, for all his achievements, Mr Monti will leave much still to be done. The economy is not growing. Real GDP has barely risen since the European single currency came into operation, making Italy the worst-performing country in the euro zone. Unemployment, especially youth unemployment, has increased sharply. Some of Mr Monti’s reforms, notably to labour-market regulations, were watered down before they were enacted. And Italy has barely begun to reverse its lamentable record of falling productivity which, unless it changes, is putting it on course to become one of the poorest countries in Europe (see article).
It is often assumed that Italy’s biggest problems are the budget deficit and the public debt, which at close to 125% of GDP is among the largest in the world. Yet with the budget deficit now below 3% of GDP and a substantial primary surplus (ie, before interest payments), Italy’s public finances are in better shape than those of many other euro-zone countries. Its more serious failings are a low employment rate, falling productivity and a loss of competitiveness against Germany.
