Mario Monti not the first banker brought in to save Italy

Pensioners likely to bear the brunt as Italians buckle down to austerity regime

Column LAST UPDATED AT 07:12 ON Mon 14 Nov 2011

WHEN Silvio Berlusconi first became prime minister in 1994 he succeeded Carlo Azeglio Ciampi, a highly respected former chairman of the Bank of Italy, who was prime minister for a year to sort out Italy's fiscal woes that time round. Some 17 years later Berlusconi has been forced out to make way for another banker, Mario Monti, who has a bigger set of problems on his hands than Signor Ciampi could ever have imagined.
 
There's another coincidence, too. Ciampi is credited with doing most of the spadework to get Italy into the euro when he was finance and budget minister in the mid-1990s.
 
So, a government of technocrats led by a banker isn't entirely new for Italy. What is new is the legacy of Signor Berlusconi, whose lifestyle seemed to promise non-stop party time for Italy.
 
The problem facing the Monti government is daunting – a whopping €1.9 trillion debt, around 150 per cent of Italian GDP. If this cannot be gripped in the coming week, the euro project could spiral to earth like an autumn leaf.
 
This means that Italy's generous pension and welfare provisions will have to be cut drastically, as will the tangle of national and regional subsidies and grants on which so much Italian graft and patronage rests. This is particularly poignant in the European nation with the fastest ageing population.
 
Grey power in networks of pensioners' groups is well organised in Italy. Berlusconi's erstwhile coalition partners in the Northern League have already said they will oppose any moves to cut back the pensions of their members. Prime Minister Monti will have to win over the trade union federations, as well as the parliamentary opposition, if he is to have any chance with welfare austerity.
 
Moreover Silvio Berlusconi's own Polo della Liberta, still the largest party bloc in parliament, has started laying down conditions for supporting any future austerity programme – which they so patently failed to deliver when they were in charge. So, Berlusconi looks like being out of office but still in power - even if that power is only one of veto.
 
It's worth reflecting on quite why the former cruise ship crooner lasted so long as Italy's prime minister. Silvio Berlusconi was the epitome of the myth of 'il bel paese' – Italy the beautiful country.

In 1945 Italy was broken, broke, fractured by war and still a predominantly agrarian economy – apart from the industrial pocket of the north west.  Then came the boom years of the Fifties and Sixties. Silvio Berlusconi came to epitomise the Italian who could make money in Italy instead of having to emigrate to do so.

Nobody cared much about his methods, fair or foul. It can be no coincidence that he turned to politics after his mentor and protector Bettino Craxi crashed and burned in the huge 'clean hands' bribery scandal of 1992.
 
Berlusconi's political genius, if such it can be called, was to reign by, with and through television, most of which he owned in the private sector, and bludgeoned and bullied in the public sector.
 
But in the past ten years it has slowly dawned that despite the cosmetic surgery and makeovers of the image and the man himself, the beautiful country and its champion are not so beautiful after all.

Italy used to be seen as part of the German economy and domestic market. Germany could be relied on to come to the rescue in previous fiscal crises. Not any more. While Germany has put in a world-class performance in exports and productivity in the past ten years, growth in Italy has been negligible and productivity poor. Most alarming is the surge in Italian youth unemployment – among the worst in the advanced industrial nations.
 
Parts of the Italian economy are resilient, with a vigorous industrial base in light engineering and design – something Britain lacks by comparison. But the real message of Silvio Berlusconi's water-slide exit from government is that his portrayal of 'il bel paese' was an illusion, a game of smoke and mirrors. Today that game is well and truly up.
 
Berlusconi's rule was based on the promise of riches from the most consummate game show host in political history. Mario Monti must now play the fair and friendly bank manager persuading his extravagant Italian clientele to live within their means – which means austerity for most and even poverty for quite a few beleaguered pensioners. ·