Gavin Jones Reuters Prime Minister Mario Monti took power three months ago to rescue Italy from economic disaster. In one way, he may have done his job too well. Monti's “Save Italy” austerity budget and his international credibility have helped bring the country' borrowing costs sharply down from levels that brought it to the brink of economic disaster in November. But that in itself is taking pressure off the broad coalition of parties backing his unelected government of experts to sustain their support for vital reforms. The parties only agreed to hand over their power when the crisis became a full-fledged emergency last year and Monti's scandal-plagued predecessor Silvio Berlusconi was forced to step down. Monti can take much of the credit for this dramatic improvement in sentiment, but the downside is that it has lessened the sense of urgency needed to drive through unpopular reforms Italy desperately needs to recover competitiveness. Critics are now accusing Monti of backsliding on his resolve to fix Italy in the face of pressure from vested interests. “Monti is in the situation of having successfully saved the country, and paradoxically it's going to make it harder for him to do the reforms that are needed,” said Alberto Mingardi, director of the Istituto Bruno Leoni, a Milan-based free-market think tank. The risk is that while the country may already have avoided a spiralling debt crisis, without greater deregulation and labour market flexibility it may remain in the low-growth, high-debt trap in which it has floundered for well over a decade. Mingardi said Monti, a former European competition commissioner, had given the impression that Italy was “unreformable” by backing down to powerful interest groups. __
