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Monti raises spectre of crisis

MILAN/ROME - Italy is again flirting with economic disaster, Prime Minister Mario Monti said, as huge crowds massed in Rome in protest at his austerity measures a day ahead of an election in Greece that threatens to destabilise the whole eurozone.

“We stepped away from the precipice before, but the hole is growing bigger and it may swallow us up. We are again in a crisis,” Monti said on Saturday at a ribbon-cutting ceremony near Milan.

Monti took over in November from discredited former prime minister Silvio Berlusconi and passed a tough austerity package to try to restore investor confidence as the recession-mired country teetered on the edge of a Greek-style default.

The measures, including €24 billion in new taxes for this year alone, pushed down Rome’s borrowing costs for a time. But a banking bailout in Spain and prospects of Greece ditching the euro have seen the benchmark 10-year Italian bond yield peak above six per cent again in recent days.

Yields pushing through seven per cent triggered international bailouts for Greece, Portugal and Ireland. In the meantime, the austerity coupled with a labour market reform seen as threat to full-time workers have driven down Monti’s approval rating to 33 per cent from 71 per cent when he took office, pollsters SWG said on Friday.

Monti’s policies have been the focus of repeated criticism by the country’s three biggest labour unions, which on Saturday staged a march and harangued the government during speeches in Rome’s People’s Square. Organisers said that 200,000 turned out for the march through central Rome. They chanted, waved red and green-and-white striped flags, and blew whistles on a bright, hot morning in the capital.

“We are here because the government’s programme ... is causing the recession to deepen in our country,” Susanna Camusso, leader of Italy’s biggest labour union, told Reuters television.

She and other labour leaders urged the government not to cut the welfare system to reduce the deficit, and to focus instead on creating new jobs as unemployment climbs above 10 per cent.

“The elections in Greece are obviously a major concern, but we need to remember that if Greece is in trouble it is because Europe from the start did not choose social policies as a way out of the crisis,” she said.

The Rome march passed off without incident, but a more vocal group is scheduled to march in Bologna on Saturday afternoon despite a police veto. Monti on Friday passed what he dubbed a “growth decree”.