Italy PM confident in new government after vote

Italy’s technocrat Prime Minister Mario Monti, appointed last year to steer his country through a debt crisis, said he was confident a stable government would be formed after elections in 2013, playing down fears of deadlock after he steps down. The former European Commissioner, who repeated Tuesday that he had no plans to stay on after the vote early next year, said the support that parties had given for his unpopular austerity-minded reforms meant that the prospect of a new government next year could be looked at “with serenity.” “They are showing notable responsibility,” he told the annual assembly of banking association ABI. Italy’s fragmented party landscape and turbulent political climate has made it extremely difficult to predict the outcome of next year’s elections, increasing the uncertainty for nervous financial markets and Italy’s European partners. Rome’s benchmark 10-year borrowing costs have climbed close to 6 percent, a level widely considered as unsustainable for the recession-hit economy as doubts have grown about the ability of the weaker eurozone states including Italy to manage their heavy debt burdens while also stimulating growth. Monti’s comments came as the secretary-general of the center-right People of Freedom (PDL) party urged former Prime Minister Silvio Berlusconi to run for office again next year, a prospect which has compounded market anxiety. “For someone who governed in such complicated years and who made way for a technocrat government without ever being defeated in parliament or losing an election, I think it is right and legitimate for him to seek the judgment of the Italian people,” Angelino Alfano told reporters. Berlusconi, a 75-year-old media mogul, left office last year after financial market turbulence threatened to push Italy’s 1.9 trillion euro public debt into a Greek-style meltdown that could have destroyed the eurozone. The PDL has been in disarray ever since and opinion polls point to a center-left bloc victory. However, public disgust with the traditional party system is running high, indicated by the success of the Five Star Movement of maverick former comedian Beppe Grillo. Monti, who has done much to restore Italy’s international credibility after the scandal-plagued Berlusconi years, has been boosted by last month’s EU summit agreement to make European bailout funds available to limit big jumps in borrowing costs for countries that have met budget commitments. The prime minister, who Wednesday handed over the finance portfolio which he has held since coming to office to deputy Economy Minister Vittorio Grilli, said world opinion about Italy had changed more quickly than expected. He contrasted the “humiliation” of Berlusconi at the Cannes G-20 meeting at the height of the crisis last year, when international partners demanded change from Italy, with the welcome he received recently at that in Mexico. However, he said the spread – or risk premium – demanded to hold Italian debt rather than benchmark German Bunds was unjustifiably wide given the reforms his government had undertaken. Analysts said the lack of political clarity ahead of next year’s election was stoking the pressure. “While financial market pressure would counter a populist wave, it is no wonder that EU officials are reportedly questioning Monti about post-election scenarios,” Riccardo Barbieri, chief European economist for Mizuho International, said in a note to clients. Tuesday, the International Monetary Fund underscored the progress Italy has made in reining in its public finances, forecasting a primary surplus, excluding interest rate payments of 4 percent of gross domestic product next year. Monti said elections next year should not upset progress. “I hope the international community and the markets will not assign too much importance to the fact that the spring of 2013 is approaching inexorably,” he said.