Italy's modern-day conqueror falters under weight of eurozone crisis

Mario Monti, who was heralded as the answer to Italy's myriad problems when he was appointed to the presidency, has run into endless obstacles, and public confidence in him is waning.

Things are not going well for Italian President Mario Monti. The elegant economist's entry into politics in November, to replace disgraced former President Silvio Berlusconi, was at first greeted with great enthusiasm. Some even likened him to Lucius Quinctius Cincinnatus, an Italian aristocratic patrician from the 5th century B.C. who was summoned from retirement to save Rome from defeat in its war against the Aequians.

Yet talk of the financial crises gripping Greece and Spain spreading to Italy has notched up the pressure on the statesman. His economic reform plans are coming under increased domestic scrutiny and doubts about his political future are intensifying. 

Over the weekend, Italy's unions organized rallies in Rome, bringing out tens of thousands of workers demonstrating against labor and pension reforms and calling for a better deal for the country's youths. And political frustration is by no means confined to activists – austerity fatigue is steadily spreading amongst ordinary citizens. 

According to a recent SWG-Agora poll, approval ratings for Mr. Monti have tumbled from 71 percent when he first came to power to half that figure. Opinion surveys also show that the political parties propping him up in parliament are faring no better; support for them has dwindled from 63 percent to 50.5 percent.

“'Sacrifice' is the most common word used by Mr. Monti, but what people from the middle and lower class perceive is that only workers at the lowest level have to pay taxes or make these sacrifices,” says Federica Compagnoni, a young woman from Mantua in Lombardy. 

Marina Robibaro, a young woman from Borgomanero in Piedmont, agrees.

“It seems that all that the government has been able to do to solve the crisis is introduce new taxes and increase the already existing ones . And they think that people can just passively endure it. It’s like being in a phase of stagnation. There’s no jobs, it’s very difficult to find one, there’s no certainty,” she says.

Losing political ground 

Depressing economic results seem to give credence to perceptions of the government's failings. Last week, Italy's official data agency released figures showing that the economy shrank by 0.8 percent in the first quarter of 2012. Investment and consumption are also in free fall, and exports are dwindling.

To a sizable proportion of Italians, these results send a clear message that Monti's austerity program, which so far has included tax hikes and painful labor and pensions reforms, are bad for growth and have disproportionately hit the middle and lower middle classes, rather than the bloated government sector.

Monti seemed to be responding directly to criticisms that the political elite is not shouldering its share of the burden when his cabinet passed a fresh reform package last week that focuses on cuts to the state worth $100 billion. The raft of measures includes a reduction in the number of government staff, the selling off of government property, and the closing down of disused army barracks.

Emphatically pro-growth reforms, to counter rising concern that belt-tightening is choking off already sclerotic growth in Italy, also feature in the new legislation. They include tax breaks to small and medium-sized businesses, particularly in the ailing construction industry, new regulations to shorten the length of civil procedures and make bankruptcies more straightforward, and measures to develop the energy sector and agricultural business.

Nonetheless, the uncertain economic outlook is pushing the Italian electorate to seek out political alternatives. The movement attracting the most support at the expense of Monti's coalition is the 5 Star Movement (Movimento 5 Stelle), a populist and euroskeptic group led by the comedian and blogger Beppe Grillo.

Although it is unclear whether 5 Stelle is for or against Italy's current caretaker government, it has won significant support because of its ability to tap into public frustration and a deep-rooted desire to purify and replace the sometimes corrupt political and economic elite. The movement has called for Italy to consider exiting the euro because of its alleged inability to solve its economic crisis as part of the bloc.

Mr. Grillo's movement made a good showing in several northern cities at local elections in May and won elections in Parma (where its mayoral candidate Federico Pizzarotti won 60 percent of the vote), as well as other cities. According to opinion polls, 12 percent of voters now back 5 Stelle. The 5 Star Movement has gained so much influence that it could make or break Monti's government, according to Federigo Argentieri, an Italian scholar specializing in European affairs at John Cabot University in Rome.

“Those who oppose austerity are not yet numerous in Italy, but they could become very numerous if Beppe Grillo's political group opposes the government. The question now is whether it will come out in favor or against Monti's government for the time being. That is very difficult to say.”

A hobbled reform agenda 

Meanwhile, parties that back the technocratic government are waning in popularity. Berlusconi's former party, the People of Freedom, has put its weight behind the Monti government and is now rapidly losing support. In the same May local elections, its share of the vote plummeted dramatically. The main left wing group, the Democratic Party, also lost votes.

Party figureheads are now openly questioning Monti's leadership. Earlier this month, Stefano Fassina, head of economic affairs for the Democratic Party, lashed out at the government.

“Monti does not have the force to carry out other reforms,” he said, calling for general elections, scheduled to take place in spring 2013, to be moved forward to this year. Other leading politicians supporting the government were quick to criticize Fassina's comments, but such an outburst from an influential political actor betrays Monti's fraying support.

The government also faces criticism from austerity proponents for not being committed enough and for watering down legislation to appease opponents. That the government has fallen short of its reform objectives is clear, Dr. Argentieri says.

While political parties are not obstructing Monti in Parliament in any coordinated way, his supporters have learned on him to weaken particularly unpopular pieces of legislation. 

“Monti has not achieved anything close to what he wanted to, although his reforms so far have helped Italy to breathe a little easier. His government is willing to carry out the surgical reforms the country needs. But it is not able,” he says.

The struggle to pass labor reforms this spring exposed the government's inability to follow through completely on its agenda. The new labor legislation was intended to make it easier for firms to fire workers. But the proposal split the left wing of the coalition and came under heavy fire from labor unions. As a result, it was watered down to allow courts to reinstate workers in certain cases, much to the chagrin of business lobbies.

Harkening back to a better past

The Monti government has also been criticized for its seeming inability to tackle stickier issues, such as Italy's problematic tax system. Taxes in Italy are among the highest in the world, and tax evasion is widespread. Around 27 percent of Italy's GDP is currently off the books.

This all raises questions about whether the tolerance for austerity measures and tax hikes is waning. But despite the rise in vocal opposition to the government, some observers argue that many ordinary people, having endured Italy's economic stasis and political ridicule for almost two decades during the Berlusconi era, have a real hunger for reform. 

Citizens with sufficient memory recall the economic boom of the 1960s – and despite formidable economic challenges in the 1970s and 1980s, Italy as recently as 1991 was the fourth-largest economic power in the world, bigger than the United Kingdom or France.

If Monti can remind citizens of this rosier past, it could be powerful political fodder for his cause. Much of the Italian electorate is reluctant to trade in Monti's technocratic government, given the alternatives.

“Italian society does not generally trust its political class nor it is convinced that this can deal with the economic crisis,” says Dr. Andrea Mammone, the author and editor of several books on the country, including Italy Today: The Sick Man of Europe.

“Berlusconi’s former government was fully discredited and many people – despite some austerity – still prefer a technocratic government," she says.

Continuing anger toward the political class is widely seen as the ultimate reason why political parties have little choice but to carry on backing Monti – their only alternative is to call a general election in which they would likely perform badly. This ultimately gives Monti's government just enough leverage to move forward with its tough economic agenda.

But with Rome's technocratic figurehead feeling the squeeze of mounting popular opposition, his place in the history books as a modern-day Cincinnatus looks far from guaranteed.