"Italian Prussian" Monti enters political storm

ROME Sun Nov 13, 2011 9:12am EST

ROME Nov 13 (Reuters) - Mario Monti, the economist who will head an emergency Italian government following the departure of Silvio Berlusconi, brings credentials earned in a decade of battles as a European Commissioner from the 1990s.

Monti made his name as the powerful Competition Commissioner who took on U.S. corporate titans General Electric and Microsoft, blocking GE's planned merger with rival Honeywell and imposing a record 497 million euro ($683 million) antitrust fine on the software giant.

His technical expertise, sharp intellect and diplomatic skills added to his refusal to bow to intense lobbying pressures made him one of the most highly regarded officials the Commission has seen.

"He didn't have a very Italian way of going about things," recalls one former ambassador, who worked with Monti in Brussels and remembers him as a hard but reliable negotiating partner. "His nickname in those days was 'The Italian Prussian'".

He was nominated by Berlusconi as internal markets commissioner in 1994, taking over the competition portfolio in 1999 where he served for five years.

Named last week as Senator for Life by President Giorgio Napolitano, Monti, 68, is expected to appoint a small cabinet made up largely of technical specialists to steer Italy through a crisis that has brought it to the brink of financial disaster.

A similar technocrat government under former Bank of Italy official Lamberto Dini passed important reforms in 1995 and the hope of many outside Italy is that Monti, or some other independent outsider, could do the same.

A convinced free marketeer with close connections to the European and global policy making elite, Monti has always backed a more closely integrated euro zone and has written a series of articles in recent months lambasting the Berlusconi government's policy failures.

He is chairman of the European branch of the Trilateral Commission, a body that brings together the power elites of the United States, Europe and Japan and is also a member of the secretive Bilderberg Group of business leaders and other "leading citizens".

REFORM DEMANDS

With bond markets pushing Rome ever closer to the point where it would need an international bailout to manage its towering public debt, investors' hopes have been pinned on a solution that would get past Italy's dysfunctional politics.

Italy's main business and banking associations have called for a "national emergency government" with broad parliamentary backing, warning that "this is not the moment for conflict and division".

Monti himself underlined the temptation of a non-political solution in an article in August entitled "Il podesta forestiero", a reference to the foreign governors or "podestas" appointed by the strife-torn Italian cities of the Middle Ages.

The article referred to reform demands imposed by the European Central Bank in return for its agreement to prop up Italian bonds in the markets, but it highlighted the widespread frustration at the failings of Italy's political class.

However as numerous politicians have pointed out over the past few days, the notion of a pure "technical government" above the daily fray is an illusion which is likely to be severely tested in the weeks and months ahead.

"He has a good feeling for how politics works but he isn't a man for horse trading," said one longtime associate.

New elections are not due until 2013, giving Monti and his cabinet a window of around 18 months to implement the kind of painful reforms to pensions, labour laws and the public sector that markets and Italy's European partners are demanding.

But he will need to secure the support of a parliament which has not won a reputation for its high minded sense of public responsibility over recent years. If he loses a confidence vote in parliament, elections early next year may be inevitable.

So far, Monti has the backing of the centre-left Democratic Party and the smaller centrist groups and has also had indications of conditional support from Berlusconi's centre-right People of Freedom party.

The regional pro-devolution Northern League has eased its previous firm opposition and says it will wait to see what Monti's programme looks like. But outgoing Interior Minister Roberto Maroni, a senior League leader issued a potentially ominous warning of the problems ahead.

"The decisions which Monti will take must pass in parliament and I think that with such a heterogeneous majority he will have many problems. I believe this solution will lead to many problems," he said.