France and Germany are going out of their way to show how the change of Italian prime minister has changed the way they treat Italy. The Nov. 24 three-way meeting between Angela Merkel, Nicolas Sarkozy and Mario Monti seems mostly designed to demonstrate that Rome is back in the top troika, after months of conflicts over the reforms needed to get Italy out of its funk. The fresh diplomatic context doesn’t solve Italy’s problems. But it will help strengthen Monti at home, as he tries to push through difficult reforms.
Paris and Berlin are now keen on restoring Italy’s European prestige by associating it with the quest for solutions to the debt crisis – instead of considering it as the most worrying problem. Berlusconi’s shenanigans and bravado had made his country the object of scorn. Now there’s hope where there was contempt.
Monti, of course, will mostly implement a reform programme outlined by his predecessor, who had come under unprecedented pressure from the European Central Bank. And his so-called “technocratic” government lacks members with the political clout required to ensure that the most difficult reforms are steered through the minefield of a divided and unruly Parliament. Furthermore, there is no substantive indication that Italy has a credible timetable for implementing the most ambitious reforms. Little wonder that benchmark yields on Italian bonds have increased since Monti became prime minister – rising by some 50 basis points, to around 7 percent, on 10-year maturity.
Still, the conspicuous Franco-German embrace should be a boost for Monti. By welcoming Italy back into the core of the euro zone, instead of treating it like an embarrassing periphery cousin, Merkel and Sarkozy help to repair the damage done to the country’s national pride in recent months.
Monti will go home from Strasbourg not as a leader battered into submission by his peers, but as a participant who helps design solutions for the zone as a whole. This will strengthen his authority – and his ability to reform.