Italy: Monti must take stock Mario Monti is hopefully enjoying his stint as Italy's prime minister, because other people certainly are. Since his appointment four months ago, the Milan stock market has risen 18 per cent and the yield on 10-year Italian bonds has fallen more than 2 percentage points to 5 per cent. Some of that rally is due to the European Central Bank's liquidity injections. If Mr Monti can win this week's battle with trade unions over labour market reform, the rally looks justified. But labour reform alone will not change the fortunes of Italy's increasingly threadbare stock market. Italian stocks have a habit of coming in last. During the 1990s they underperformed the FTSE Eurofirst 300 index by 11 percentage points. A sluggish economy and concerns over corporate governance are part of the explanation. Small free floats (often accompanied by one dominant shareholder) and a decline in new listings, are more recent concerns. When Prada, a linchpin of the Italian luxury goods sector, went public in 2011, it did so in Hong Kong, not Milan. The problem goes deeper, however. According to Citigroup research, the number of listed Italian companies has fallen by a fifth in the past decade to about 270. That trend continues: Bulgari has been bought by LVMH, and Benetton looks set to be taken private. The value of Italian stocks as a percentage of the economy's output is less than the Polish equivalent. A revived economy should help boost Italy's flagging investment case. But Mr Monti can do more. One way of giving new impetus to the stock market as an underused tool of corporate Italy is to complete the privatisation process. The state owns stakes in oil and gas group Eni worth at least €20bn and in electricity utility Enel worth €8bn. Why does the economy ministry own a stake worth €750m in STMicroelectronics? Those assets are equivalent to about 2 per cent of national debt. Corporate Italy is right to want new labour laws. Its incredible shrinking stock market needs a more fundamental rethink.