Good news from Rome: serious people are running Italy. After a decade of government-as-cabaret-act under Silvio Berlusconi, the era of Mario Monti should be more like one of those classic 1970s Italian movies that had subtitles and dealt with matters of life and death. He has made a good start; pension reform is in place and he is starting to tackle entrenched rigidities in the economy. Mr Monti’s efforts are not reflected in bond markets, though. Italy’s 10-year bond yield, at 6.4 per cent, remains higher than Spain’s.

Holders of Italian bonds tend to fall into three categories – optimists, pessimists and pessimists (or optimists) who want to be optimists (or pessimists). For a country that, in the past six months, has voted through some €80bn of spending cuts and revenue measures to target a primary surplus of 5 per cent of gross domestic product next year, the optimists ought to be on top. But they are not, mostly because Italy’s fiscal position remains precarious. After last week’s downgrade, it now has the second lowest credit rating (triple B plus) in the eurozone bar Cyprus and the three bail-out countries. That is a slender limb on which to undertake a €650bn gross funding requirement up to 2014.

Italy’s 10-year bond yield is below the 7.5 per cent hit last November. But Spain can borrow at 5 per cent. Rome could reduce funding costs by borrowing at the shorter end – two-year money can be had at 4 per cent. But that would shorten the maturity profile, which, at about seven years, is one of the few reassuring things about Italy’s €1.9tn of net sovereign debt. If Italy wants to convert those pessimists who want to be optimists, it is not enough to meet exalted expectations. Mr Monti should target a positive surprise, such as higher steady-state economic growth (how about 3 per cent, from today’s zero?). Only then will Italy’s borrowing costs really come back to earth.