EZONE MESS: The rise and rise of Mario Monti

One can usually rely on something to rise to the top. With Irish Coffee, it tends to be the cream; and when making jam, it’s the scum.

Maybe that’s why the Irish roots of Jim O’Neill make him the cream of the Goldman crop. What that makes Mario Monti is entirely a matter for you to decide, based on the evidence.

I was reading some Tweets this afternoon, in which MEP Dan Hannan (fine man, good Irish stock) was taking the piss out of Monti’s rousing speech to the European Parliament. All good knockabout stuff, but let no man underestimate the Italian Prime Minister. You’d have to be up very early indeed to catch any flies on our Mario.

First up, he is a man who understands the markets. He is actively – and quite successfully – trying to reposition Italy as a sort of ClubMed Franco-Germany. After all, the Italians make cars like the Germans, and wines like the French. As a former adman, I am bound to observe that this is a product claim with at the very least a degree of substance. Mario told Italian Sky News last night that he sees “no reason why the bond spread between Berlin and Rome might one day soon be zero”. Trust me, I’ve written speeches for others, and this guy is a class act.

Second, he has avoided daft claims about the impossible – and stuck instead to what Italy can reasonably achieve. The markets have responded warmly to this. I think it is in no small part down to Signor Monti that the country just got away €4 billion of benchmark securities due in November 2014 at a yield of 3.41%….down from 4.83% at the last similar-maturity bond auction on January 13th.

But above all, Mario Monti has the common sense and killer instinct of a Mensa fox. Not only has the bloke grasped every opportunity to steer the euronauts away from austerity and towards growth investment, he has also used his political acumen to argue one very simple point: Greece is dead – don’t throw the good money after bad, whack it into those ezone economies that can, with help, survive. (For example, Italy).

What do I think? I suspect Mario is one of those individuals in history who accelerate changes that were going to happen anyway. Is that an insult? Not at all: he has been given a job to do, and thus far he has excelled. He inspires confidence, and he is his own man.

That last point is key. So many ClubMed politicians have wound up – whether they liked it or not – becoming (and playing) the victim. In taking on the received wisdom of austerity, Monti has become not so much victim as victor. This morning he openly took a swipe at the EU’s two founding nations as “widely recognised to be at the heart of eurozone problems”. There isn’t a thinking economist anywhere on the planet who would disagree with that, but it took a very brave man to say the unthinkable.

I have read his speech to the EU Parliament in Brussels today. I think it the cynical speech of a financial technician, and that worries me. His mentions of ‘democracy’ in particular struck me as gratuitous appeals to the gallery. But sometimes, the manipulative technocrat can be exactly what a liberal democracy needs….provided he knows when to step back.

If I had to lay money right now on the chances of a ClubMed survivor that might go on to prosper, it would be Italy. As early as 2009, The Slog fingered the country as suffering from accountancy sleight-of-hand at the fiscal level. Back then, I plonked for Italy as the Dark Horse of default: but Mario Monti stands an excellent chance of denying that prophecy.

Italy’s Prime Minister is a player. He is also – blinding glimpse of the obvious – Italian. And as such, he is more Mussolini than Berlusconi. But whereas Musso made the trains run on time, my feeling is that Monti Python will try to squeeze every last drop of potential out of what Italia as a brand has going for it.

Related: Mario Monti makes a play for Greece’s bailout cash

38 thoughts on “EZONE MESS: The rise and rise of Mario Monti

  1. I can in no way comment on Monti because I know nothing about him. I only know he is a goldman technocrat, which makes me highly suspicious but he may well be a very capable one. In many ways that worries me more. A country that becomes successful by moving from democracy, to banker led technocracy (is that a word?) could set a very disturbing precedent for others. A very good excuse for others to follow that example. I hope that doesn’t sound like I’m wishing Italy ill, because I don’t, but I do not want to see a technocratic, post democracy Europe either.

  2. Between them Draghi & Monti are going to save to Eurozone. They’ve beautifully outflanked the Germans… they’re inflating the money supply and engaging in fiscal transfers through subtle means such as LTRO. This is the only rational response to the sado-monetarist austerity nonsense the Heinies have been forcing on the PIIGS with such dire results, egged on by the mentally deficient who really believe this whole thing is a morality play. It never ceases to amaze me that after the disastrous debt/deflation of the 1930′s, which directly led to the rise of Hitler, otherwise rational people still think austerity, hard money and the gold standard is the way to go.

    It’s a shame it’s too late for the Greeks. These “bailouts” are just crooked technocrats teaming up with crooked bankers to save each other while the ordinary people don’t see a penny of it, lose their jobs and the suicide rate goes up. We can now all watch as in the next Greek election – if they actually have one – the centre disappears and the extremes of right & left take over. Civil war is not impossible in these circumstances. It isn’t that long ago the Colonels were running the taverna and the reds were assasinating people.

    • Completely agree about Greece. As to these guys saving the Eurozone. What do you think these policies will have long term on the German economy. And I do mean that as a genuine question. Printing/inflating is exactly what Italy etc need imo, and these policies may stave off the current crisis for a while, but the inherent problem in the Euro zone is that one size does not fit all, they are different economies. So what medium/long term affects will this have on the Germans I wonder. Will we start to see runaway inflation. Are we likely to see an enormous boom for them and then the corresponding bust? The same way we saw in Ireland etc after their rates were kept too low, and the money supply too high.

      • Hmm. If I really knew I’d be a lot richer than I am… but it’s a good question. I think ultimately the German economy is going to overheat and have a nasty downturn, though it will take a while. When I lived there they were very smug about being a sober people who wouldn’t indulge is house price inflation like the feckless ‘insel affen’ (as they like to call us British after a drink or 4) but as rabid exporters gathering surpluses they’re going to have to do something with all that cash they’re gathering. So I expect German business to engage in non-rational expensive asset purchases abroad which ultimately lose money, while the unions wake up again and start asking for pay rises, which ultimately will price them out of capital equipment markets again. Combine these factors with their misplaced smuggery over their surpluses (which is causing them to indulge in reckless hard money policies which will destroy the market for their goods in Europe, since the deficit states will have no money to buy Mercs & Beemers anymore) and they are going to have a nasty hard landing.

        I have some sympathy for the Germans; they’re using a grossly undervalued currency with interest rates that are too low and in an ideal world they’d leave the Euro and re-establish the D-Mark. But they killed 6 million Jews and they’re still on probation, so they can’t.

      • yea that probation thing. They were getting so close weren’t they. And just as everyone was starting to let it go, they gave to go and blow it. Almost couldn’t believe my ears when their foreign minister came to London recently and said something along the lines of ” We feel very guilty about the war so you have to integrate into the E.U. and give up your sovereignty”. Obviously was not worded like that but it is what he was saying. And he was actually trying to sell it to us.
        So maybe Dragi and monti and goldman united might save the day and there will be no burning of German flags in Rome. Makes me wonder if it may end up with Italian flags getting burned in Berlin in a few years, if they are getting the brunt of the Euro mayhem. That would be something

  3. I like “More Mussolini than Berlusconi” though I doubt Monti will and Berlusconi may well be somewhat offended too!

    It’s still early days for Monti & his mob, but he seems to be steering Italy in a positive direction – but Italy might not want to play ball.

    Italy does not realize just how much potential it has, in my opinion.

    By the way, I live in Italy & have done so for many years.

    If he has time, Monti might like to try sorting out Italy’s slow, complex and quaint legal system.

    Time, as always, will tell.

    • Playing around with Italy politically or financially is not very advisable. As an electorate Italy is sort of evenly split between fascists and communists. The fascists seem to be generally on top nationally while the communists are generally on top locally.

      It should also be remembered that the Italian political system was deliberated structured to ensure that it was weak and that only coalitions could gain power, mainly to ensure that the communists couldn’t take over but with an eye to the possibility of a fascist resurgence as well.

      Another thing not insignificant is the estimated 22% of current Italian GDP which resides in the black economy, much better than the 30% ten years ago or the 90s when almost everyone there had an official job providing around a third of their income on which they paid tax and an unofficial job or business that provided the other two thirds of income on which they did not pay tax.

      As I see it Italy is one apple cart that could make a very big mess in all kinds of unforeseen ways if it was upset.

  4. John
    I know I am not one of your activist sloggers but there are many facets to this argument which don’t add up.
    Italians allegedly are level headed people and and some wealth is locked to their cash flow, land ownership and properties. However they are suffering big divisions and huge uprise.
    According to zerohedge your claim for Italian Monti cunning may proove fruitless. Reference the coming wave of debt swaps.
    On the other hand considerable agricultural produce is imported from other meds (Greece , Spain , Malta Etc ) and rebranded as genuine Italian. When Greece goes the vacuum will be visible
    Italian automotive industries are in melting point ( no new products and those cheap ones are no better than the Korean ones). Design was & is their strength but looks that it won’t be for long.
    Clothing and general fashion industries relying on extravagance and luxuries. I am afraid may have the same fate as Swiss watches .
    Wines was a strength but new world wines have come long way and now have come to be mainstream.
    Where do I go wrong ?

  5. He certainly appears to be the most impressive of the players at the moment. He has grasped the opportunity and should be applauded, if I was Italian I would be thinking that not electing someone is certainly an improvement on the last democratic process. Italy certainly has a brand which can be exploited and Merkel must be tempted by his argument to divert funds their way, and lets face it this wouldn’t be the biggest mistake she has made recently.

  6. “…whereas Musso made the trains run on time”

    Really? According to my sources Musso told the media to report that he had got the trains running on time. Nothing more.

    That’s one reason I always likened Blair to Musso…he got the media to report that the NHS was much improved. It wasn’t.

  7. The two Marios seem to have a different agenda to Merkel.
    It’s going to get interesting.
    Maybe, just maybe GS will end up running the world, the two Marios seem to be knocking Europe into shape slowly.
    Greece is certainly an issue but, I think they will cauterise and print.
    I think they will print to their hearts content believing that they can resolve those issues later.
    Goes to show what can be achieved when a little intellectual ability is introduced. We tend to elect politicians on their ability to convince us that they are capable, in truth, they, nine times out of ten, are not.
    We live in interesting times..

    • kfc, Will goldman rule the world is an interesting question. An even more interesting one is do they already? Or to take it even further, do the people that rule goldman, rule the world. I mean Goldman are an institution that seem to be supplying high ranking officials and indeed leaders from the U.S. to Europe and elsewhere. Who exactly is pulling the strings at Goldman?

      • @SMT;
        Yes, indeed who is pulling the strings but, we do seem to have “turned a corner” albeit gently, nevertheless there is a different mood pervading, things are certainly changing and the Marios are at the centre.
        For me, I now no longer percieve Merkel and Sarcozy to be dominant, the wind now is blowing in a different direction hence Merkels support for Sarcozy in the forthcoming French elections, she needs friends….
        All is, as always, not what it seems..
        But, what is becoming increasingly obvious is, GS has little regard for the Mercozy arrangement.

  8. I picked up a copy of Time Magazine to read on the plane a couple of days ago. The feature article was a piece on Monti. Maybe I’m just imagining things, but I seem to sense echoes of that article in this Slog post.

    Unfortunately, I found the Time story to be completely one-sided, an embarrassingly unbalanced tribute to Monti. It almost seemed like the piece had been commissioned; perhaps a spin to try to improve Italy’s chances once the Lidless Eye starts turning from the ruins of Greece onto the next victim…

  9. Monti is fighting for his country’s survival. Why on earth would he not?
    He is going to use every trick in the book to get Italy off the hook. If that means selling Greece down the river, he won’t see that as a problem.
    He won’t have any compunction doing the same to France, since they are in hardly a better position than Italy; they just hid behind Germany’s petticoats a bit better.
    North & South Italy, a Club-Med ingrained resistance to paying taxes, institutionally corrupt political and business sectors, Italy can’t squeeze their way out of this, but that shouldn’t stop the Marios trying. They might run up against a very impatient people, however, if they can’t fake some growth.

  10. http://www.zerohedge.com/news/greek-president-and-nazi-resistance-fighter-lashes-out-german-boot-pushing-country-brink “Greek President Karolos Papoulias slammed Germany’s finance minister for recent comments about his country as stalled bailout talks stoked tensions between Greece and the northern European countries funding its rescue. “I don’t accept insults to my country by Mr. Schaeuble,” Papoulias, who fought in the resistance against the Nazis during World War II, said in a speech today. “I don’t accept it as a Greek. Who is Mr. Schaeuble to ridicule Greece? Who are the Dutch? Who are the Finns? We always had the pride to defend not just our own freedom, not just our own country, but the freedom of all of Europe.”
    This is all moving into a whole new arena.

  11. John, I like your comments but feel that things could go in a different direction.
    1/ Like a smooth sales guy he will initially get his way. As usual though people start to look a bit closer at such operators and check to see if he is doing or achieving what he says he will. I’m not sure that is possible in the current climate.
    2/ Europe now resembles a herd of Wildebeest followed by a pack of Lions. The Lions (the money men) will just pick on the weakest one by one and feed from them. After Greece it looks like Portugal’s turn, and then Spain. Italy will follow on some time after that. And Mario, even with his gift of the gab will be up kaki strasse.

  12. Whilest one can only deplore the means by which he was elevated, the mood here in Italy has improved very noticeably since he was, and certain parts of the real economy are holding up well enough, and of the course the black economy which is the real real economy in many parts of the country is holding up as well and enables survival for huge sections of the population.

    Under the clown Berlusconi, there was a real srying out for someone respectable to represent Italy abroad especially, and Monti is doing a good job at that.

    As other sloggers have commented the demographics are truly horrible, the North/South divide is very real, and there is a massive and horrendously expensive state, there’s the damn’ church which hardly helps matters, the banks like everywhere have closed their purse strings, but the Italian people are endlessly inventive, talented and cheerful, with large amounts of cash under the bed, so I am generally optimistic about the medium term.

    • Yes, one of the things I’ve always admired Latinos for is there willingness and ability to ignore the State and never allow it to get in the way of making money and enjoying its rewards. Too bad a majority of us Brits are sticklers for abiding by the rules and paying our taxes, especially since most of our taxes are flushed down the lavatory.

  13. Monti may or may not be a class operator but the maths on debt don’t add add. There is also the 30% productivity gap with the North. Italy managed 0.07% increase pa over the last 10 years, Germany 0.7%. The gap is growing and the debt dynamics are unsustainable. LTRO is can kicking. The Italian economy is sclerotic and corrupt compared to say France. Their birthrate is disasterous. So better marketing may be presenting a more favourable picture but underneath the Italian economy is dying. However 50 years of transfers from Germany together with some free ECB money will postpone the funeral.

  14. Let’s get a bit od perspective here . Monti and Draghi are ex GS and as such know how to play the markets : LTRO plus a January rally combines to boost risk assets , check where Italian yields were a year ago . The real test for bond appetite comes around May and June when money doesn’t naturally flow into the markets . Notice the summer sell-of in Euro-zone risk and remember that both Italy and Spain have COLOSSAL debt still and need to be able to sell bonds all year long , not just in the first quarter . Chuck in a potential Socialist victory in France and the Euro saga is far from over , even if they manage to sever the Greeks successfully .

  15. Remind me, what is the largest organisation in Italy financially, oh yes the Mafia.

    Any comparison with France is laughable let alone Germany. You will never change the Club Med attututade to life it is too engrained. Germany will do well to pull the plug and get out now, it is already turning to the East, a strategic alliance with Russia? It’s happened before

  16. It used to be said that graduate trainees from Unilever or Procter and Gamble were highly prized if they chose not to seek a career in those organisations. Perhaps GS have just invented the best business school on the planet?

    • @Rowland;
      “Perhaps GS have just invented the best business school on the planet?”

      You just hit the nail firmly on it’s head. A country is a business, and, as such should be run along those strict lines, not like our clowns who run them like their own personal sweetie shops and don’t have to concern themselves with petty details like profit and loss.

  17. Pingback: The Ides of March | Icliks Incoming

  18. “the Italians make cars like the Germans, and wines like the French”

    Cars…but not quite like German ones: Fiat vs BMW? Alfa vs Merc? Hmm…

    And wines…but not quite like French ones.

    Actually the best Italian wine is comparable with all but the very very best French imho.

    Second all your comments about Monti though – he seems to be the dogs’ wotnots.

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