Vodafone Group Plc (VOD) Chief Executive Officer Vittorio Colao threw his backing behind Italian Prime Minister Mario Monti, who will step down amid parliamentary opposition and may be offered a second term.
“Italy needs a leadership which is competent, hard working and has great integrity,” Colao, an Italian, said in an interview yesterday at the Mobile for Good Summit in London. “I can’t think of many people who display those characteristics better than Mario Monti.”
Colao made the comments as Italy’s government crisis, which pits Monti against former Premier Silvio Berlusconi, is raising concerns about a new front in Europe’s debt crisis. Vodafone on Nov. 13 reported service revenue that missed estimates and a 5.9 billion pound ($9.5 billion) writedown in Spain and Italy that sank the mobile-phone company into a first-half net loss. Italy is Vodafone’s third-largest European market after Germany and the U.K.
Monti, 69, said Dec. 8 he will resign due to parliamentary opposition from Berlusconi and his allies, who had previously backed the government. The unelected premier is undecided about whether he’ll seek a second term, Italian newspaper La Repubblica reported yesterday.
Under Monti’s 13-month-old government, Italy’s 10-year bond yield has declined more than 200 basis points and the government last month sold debt at the lowest rate in two years. His austerity measures, while deepening the country’s fourth recession since 2001, have also left the nation on track to bring its deficit within the EU’s limit of 3 percent of gross domestic product this year.
In contrast, the resurgent Berlusconi hits the campaign trail with his German-skeptic, anti-austerity message. Yesterday, the imminent end of Monti’s government fueled the largest increase in Italian borrowing costs in four months.
“In Europe we have very healthy nations and there are less healthy ones,” Colao said. “We should all work together to help those less healthy ones to recover strength, entrepreneurship and employment through structural reforms.”
Vodafone’s organic service revenue in southern Europe slumped 9.8 percent to 4.98 billion pounds in the six months through September, led by Spain, Portugal and Italy. Spain accounted for 3.2 billion pounds of the 5.9 billion-pound writedown, with Italy taking up the remainder.
The first-half net loss was Newbury, England-based Vodafone’s first since Colao, a former McKinsey & Co. partner, became CEO in 2008.
Monti said yesterday investors shouldn’t expect the imminent demise of his government to lead to a political vacuum that will fuel market turmoil in Italy.
“I’m very confident that Italian elections, when they come, will give room to a coalition or government that will be in my view a highly responsible, EU-oriented government, which will be in line with the huge efforts already pursued by Italy,” Monti said at a press conference in Oslo.
He also dashed hopes of those who would like to see him enter the race for premier and take on Berlusconi.
“I am not considering this particular issue at this stage,” he said. “All my efforts are being devoted to the completion of the remaining time of the current government.”
Monti may not directly run as a candidate, although he could be on the ballot indirectly. Ferrari SpA (FERI) Chairman Luca Cordero de Montezemolo has founded a political party that is running on pro-Monti platform that would offer the premiership to Monti if he and his allies manage to win the vote.
Berlusconi told Canale 5 television today that the Italian economy is in worse shape than when he left.
The Italian crisis may have an impact on other countries as the election campaign puts the EU’s budget policy up for review in the 27-country area’s fourth-largest economy.
Italy’s image has improved because of Monti’s government, Riccardo Barbieri, chief European economist at Mizuho International Plc in London, said in a research report.
At a summit in Brussels on Dec. 13-14, EU heads of government will debate a road map for the overhaul of the euro area, including increased powers to intervene in national budgets and the establishment of a single banking supervisor. Finance ministers will meet first, on Dec. 12.
To contact the editor responsible for this story: Kenneth Wong at firstname.lastname@example.org