Italians hope new government can save their nation

ROME -- Even in a country where an inept, unstable and bickering government is nothing new, Italians say they are nervous about the future.

"What will be next if the Italian economy goes bankrupt?" asked Giacomo Levy, a 33-year-old psychologist. "It's something hard to imagine. People or business can go bankrupt. But the government?"

Much of Europe, not just Italy, faces the prospect of insolvency as EU finance ministers on Wednesday said they had yet to finalize a plan to help debtor nations pay their massive debts.

The failure comes before a European summit next week where heads of state are supposed to agree on a plan to hold the eurozone together after bailouts of Greece and Portugal.

Former European commissioner Mario Monti, the newly sworn-in prime minister charged with passing tough reforms to save the debt-ridden and slow-growing Italian economy, is hoping that Italy will not be the next domino to fall in the EU debt crisis.

Italy, the world's eighth-largest economy, is having trouble raising money in the credit markets because of investor fears that it will need to beg for help from the EU to pay its loans.

Monti named his Cabinet two days earlier than planned and presented his first reform package to parliament four days faster than scheduled. Since then he has run into stiff resistance in parliament.

Political parties are demanding concessions on budget cuts and taxes and have held up approval for government appointees.

As a result, Monti's team has been slow to finalize proposals aimed at paying down the government's debt.

"Monti selected a Cabinet of ministers that included no politicians," said Milan-based political scientist Marco Pisa.

"The positive side of that is that they will write reforms without worries whether they will have an impact on their re-election chances," Pisa said. "But the down side is that they have no political machinery or parliamentary alliances to draw on to shepherd the reforms through parliament."

Losing ground

Markets have not reacted kindly to the government's lack of swift action: The Italian stock exchange has lost ground since Monti took office, and the yield on Italian bonds has stubbornly remained above the 7% threshold that sent Ireland, Portugal and Greece scurrying for help earlier in the year.

Over the last decade, Italy had the fourth-slowest-growing economy in the world, behind only Zimbabwe, Eritrea and Haiti.

The country has seen its place in the world economy steadily diminish over the last generation: According to the International Monetary Fund, Italy was the world's fifth-largest economy in 1990 and sixth in 2000. It's estimated to be 13th in 2020.

But Italy also replaced the regularly devalued lira currency with the euro in 2002, giving the country much-needed monetary stability that helped balance out slow growth and political uncertainty. The fear now is that if Monti's government fails, things could get worse in a hurry.

"It seemed like in the past we had the luxury of less-than-perfect governments because, despite everything, the economy grew and people had jobs," said Renata Soru, a 55-year-old bus driver in Rome. "I don't think we have that luxury any longer. If Monti's government fails, what will happen?"

Polling shows Monti's bind. Support for his government tops 80% in most polls — compared with 20% or less for Silvio Berlusconi just before he resigned as prime minister in early November.

But the emergency initiatives Monti's ministers say they may propose to end the crisis poll far lower, items such as a property tax, estate tax, a fee on bank deposits, changes to immigration rules designed to broaden the tax base, and cutbacks in government spending on pensions, state-run television programming and medical services.

"It seems that most Italians have yet to make the connection between their support for the irreproachable character of someone like Monti and the actual policies he is likely to put into place," said Maria Rossi, co-director of the Opinioni polling company. "Once they start to judge Monti on his policies rather than his image, his approval level will drop."

Italy's last hope?

Monti, who was working as an economics professor before being tapped to head the government, is seen as an antidote to the years of scandal and controversy that marked the Berlusconi era. He said the discomfort from his tax increases and spending cuts would reach everyone, and that it would be spread out evenly, with nobody spared.

Many Italians feel Monti is their last hope.

"Someone like Mario Monti is perfect for the job: He is honest, intelligent, respected, and he doesn't have political favors to repay," said Ornella Buoncuore, 39, a high school history teacher. "If he can't get the job done, who can?"