Monti: Italy Not Headed for Another Election Soon
Strains have emerged in Italy's new coalition government just weeks after its formation, raising questions over how long it will last. But, former Prime Minister Mario Monti said he does not believe an election will be called any time soon.
"I don't believe that [Italy will be headed for an election in the next six months] for two reasons," Monti said at a press conference in Singapore on Tuesday in one of his first public speeches after leaving the Office of the Prime Minister in April.
Firstly, Monti said that he is confident in the "strong" and "appropriate" leadership of new Prime Minister Enrico Letta.
"He is strongly resolved to go ahead with EU compatible policies, in particular with the fiscal policy and structural reforms recommended by the EU," he said.
Secondly, he noted that elections are unlikely until a new electoral law is established, which would take more than six months.
"Everybody in Italy agrees that the country needs a new electoral law to remedy some of the distortions that had been generated by the current electoral law."
"Because the electoral law will be linked to some other aspects of institutional reform - that likely will take more than six months," he added.
Italy's widely-criticized electoral law, enacted under former Prime Minister Silvio Berlusconi in 2005, guarantees a majority in the lower house to the party or coalition that wins the biggest share of the overall national vote.
In his first speech to parliament last month, current Prime Minister Letta said the nation's electoral law would be changed before the next national election.
Bond Market: Calm Before the Storm?
Monti said he believed the stability in the Italian government bond market could be sustained.
Ten year Italian yields have fallen sharply over the past year, from above 7 percent at the start of 2012 to below 4 percent currently.
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"If you ask me do I see reasons to believe a storm should soon follow this calm in the bond markets? My answer is no, I don't see that at the moment."
He said Europe is "much better equipped" to deal with further episodes of the region's debt crisis given the policy arsenal of the European Central Bank (ECB).
Last September, the ECB launched its Outright Monetary Transactions (OMT) program. That followed a pledge by ECB president Mario Draghi to do whatever it takes to save the euro area from collapse two months earlier as yields in peripheral bond markets spiked on worries about Spain's financial position.
"This helps explain in my view why interest rates have calmed down and why spreads over the German Bund have come down a lot," Monti said.