Trader Talk

Technocrats Are Coming in Greece—Italy Next?

Prime Minister Silvio Berlusconi won a budget vote, but without an absolute majority. The Italian opposition has asked Berlusconi to resign, and is likely to call for a confidence vote that Berlusconi will likely lose.

Piazza Venezia, Rome, Italy
Panoramic Images | Getty Images

Technocrats are coming in Greece and, likely, Italy. Their main purpose will be to push through the reforms their predecessors could not. Even if they succeed, implementing the reforms will be a different matter.

Technocratic governments are usually transitional governments run by technical experts. In theory, they are not politicians, which is part of their appeal: they can institute changes because, well, they're not politicians.

You probably never heard of Mario Monti, or Lamberto Dini, but they are very much on the minds of Italian politicians.

Dini was an Italian politician and Treasury Minister under Berlusconi in the 1990s; when Berlusconi was forced to step down as Prime Minister in December 1994, Dini was appointed Prime Minister and led a technocratic government until early 1996 that implemented many reforms and is well regarded today.

The same can be said of Carlo Ciampi, who also ran a technocrat government in Italy from April 1993 to May 1994.

Monti was on the European Commission (the executive body of the European Union) from 1995 to 2004 and is often mentioned as a successor to Berlusconi, but only as a caretaker government until new elections could be called.

A technocrat government would be able to introduce labor market and pension reforms that are currently all but unthinkable.

But getting them passed is another matter: the left would be opposed from the outset.

That's why most feel the crisis will need to play out a bit longer, and the bond market is obliging: at rates near 7 percent, Italy will soon be unable to finance its debt. It will then become a ward of the ECB/IMF, and that's when the real deals will be made with the Italian politicians.

That may be why the ECB is showing such reluctance to open its kimono: there is no other way a deal can be made.

Bookmark CNBC Data Pages:


Want updates whenever a Trader Talk blog is filed? Follow me on Twitter:

Questions?  Comments?