The political dysfunction of the world’s largest economy is epic. Even though Mr. Market is not forcing the US hand, the political class is intent on shooting itself in the foot. Yet the uncertainty over next year’s marginal tax rates has not impacted the hiring process as the average monthly non-farm payroll growth has not diminished. Nor have investment plans been adversely impacted. Non-defense durable goods orders, excluding aircraft, a useful proxy for capital investment, rose 2.7% in November after posting a 3.2% increase in October.
Italy is not as fortunate. Its economy is contracting. Mr Market is likely to be less patient. Although Italy’s net debt issuance in 2013 appears less than in 2012, there is little room for error.
Monti was looked upon as the savior of Italy after Berlusconi had undermined its gravitas on the world stage with his antics that are unbecoming of a man of his stature. Yet Monti took his role too seriously and not seriously enough.
The Bible says it took Jesus 40 days in the desert to decide between an earthly kingdom and the heavenly one. It took Monti about 48 hours from the time he submitted his resignation until his press conference where he offered his support to those who pick up his Cross reform agenda. At precisely the moment in time, when the Italian people need the earthly bread, Monti demands sacrifice in exchange for his blessing and a vague promise of a better life thereafter.
Monti is too much the Other. He puts himself above Italy and the Italian people. Politics, which the ancient Greeks taught the ancient Romans, is the sphere of freedom and through it people shaped the community in which they lived. Monti is too pure for Italian politics and the compromises that it requires.
By insisting that his virtue remains beyond reproach, Monti is willing to see Italy return to the hands of those that would defile it. Monti’s reform agenda never had deep democratic roots. His ascent to the premier’s office was not a function of an election, but a deal worked out among the major political parties after Berlusconi resigned amid scandal and crisis. His agenda was implemented largely by decree. He often demanded votes of confidence on measures that forced agreement from a reluctant parliament. Monti’s public support began slipping shortly after his ascension.
Over a hundred years ago, William Jennings Bryan harangued against crucifying America on a cross of gold. Now Monti is willing to crucify himself to preserve his sanctity. Yet his holiness has little value ,if it condemns his country to greater trials and tribulations, except for his own salvation.
Monti did not seek allies and get “buy-ins” for his agenda. This places at risk his accomplishments over the past year. While center-left and center-right parties may endorse some parts of Monti’s program, it seems like political suicide for any party to endorse it lock, stock and barrel.
His reforms are not a sacred text. Berlusconi, as vile of a character as he may be, is politically astute in ways that Monti cannot even fathom. He chose the timing of Monti’s downfall, catching the premier seemingly unprepared. It is Monti that says he will not serve. Berlusconi is all too happy to be prime minister again. He would dismantle much of what Monti built and he would do it in the people’s name.
It is Monti, for example, that re-introduced a tax on the Church’s commercial properties, which Berlusconi had previously eliminated. In addition, Berlusconi has already indicated he would repeal the new real estate tax, which is understandably terribly unpopular, and boost the sin tax on alcohol and tobacco.
Monti enjoys and values a camaraderie with the European political elite that Berlusconi mocks. Monti sought to soften the German demands for austerity, and the letter of the treaties, by invoking the spirit. Yet he has little concrete to show for it. The biggest reason that the monetary union survived 2012 was due to the actions of his countryman, ECB President Draghi, who incidentally was accused by Bundesbank President Weidmann of also circumventing democratic principles.
Berlusconi would challenge Merkel in a way that Monti would never dare. Following the political commandment that “an enemy of my enemy is my friend”, Berlusconi may reinvigorate the Mediterranean axis and join forces with France and Spain to counter Germany.
The polls suggest the PD, under Bersani, is still poised to secure the most votes in Italy’s election in late February. It says much about the condition of Italian politics (and perhaps by extension European politics) that the former communist was among Monti’s most ardent supporters over the past year. Endorsing Monti would not likely increase Bersani’s public support, and could cost him. Monti must indeed be suffering from delusions of grandeur if he thinks Bersani will move aside for Him.
Without seeking to maintain a strong and powerful presence in Italy’s politics, Monti has no way of ensuring that his program develops the kind of democratic roots necessary to endure. His acknowledgment that sometimes Berlusconi is incomprehensible says just as much about Monti as it does Berlusconi.
Monti may be good for Italy, but the Italian people are worse off now than a year ago. Interest rates are lower and the equity market higher, but unemployment is higher and the economy continues to contract. The basket of goods citizens get from the state has been reduced and the price of the basket has increased. If the Italian people are to be saved, they need to understand how Monti’s reform agenda will mean a better life for them and their children. Yet for all Monti’s effort, he might as well be speaking Latin.
If Monti had tougher skin, like Berlusconi, he would not have been put off by the poll that found some 61% of Italians do not want him to run for premier. Given the fractious nature of Italian politics, the 39% that do, would make Monti a power to be reckoned with and that is without even trying to present his case to the Italian people. It is more support than the Man and Party of 12 had a couple of millennia ago.
This piece is cross-posted from Marc to Market with permission.