Italy’s technocratic government has finalized a series of measures intended to liberalize an economy heading toward deep recession, in the face of mounting protests countrywide.
“Italy’s economy has been slowed down for decades by three constraints: insufficient competition; an inadequate infrastructure; and complicated administrative procedures,” said Prime Minister Mario Monti as he outlined the agreed measures.
Taxi drivers, protesting across the country all week against forced opening of their occupation to competition, blocked streets in central Rome at news the cabinet had passed its decree.
In Sicily, fuel is running short because of barricades set up by truck drivers and agricultural workers angered by high fuel prices.
Pharmacists, operators of petrol stations and lawyers also plan to strike, with powerful guilds resisting action to open up professions and abolish minimum tariffs.
“Half of Italy is ready to wage war on the government,” was the front-page headline of Il Giornale, a daily newspaper owned by the family of Silvio Berlusconi, the former prime minister who resigned last November but still holds the key to parliamentary support for Mr. Monti’s unelected technocrats.
The decree takes effect once signed by the head of state – but it needs the approval of parliament within two months to remain in force. Noting that many MPs are the very same lawyers and notaries identified by the reforms, analysts suspect the legislation may be watered down by special interest groups.
The package also targets the gas and electricity markets, the insurance sector and local public services. A court is to be established to speed up corporate cases to try to attract foreign investment. A process of allocating digital television frequencies, widely criticized as favouring Mr. Berlusconi’s Mediaset company, will be reviewed.
Mr. Berlusconi, whose previous government failed in its promise to liberalize Italy, said lawmakers would have the chance to amend parts of the legislation “that seem to us not to be real factors of development and growth.”
Pierluigi Bersani, leader of the centre-left Democrats, said “more and better” could be done.
Despite the strike action, polls show broad public support for Mr. Monti who, driven by his past experience as EU competition commissioner, seems ready to ride out the storm. He told the Financial Times this week he was more worried about Europe’s handling of the euro zone sovereign debt crisis than domestic protests. He also admitted he was concerned he was not getting out enough beyond Rome, Milan and Brussels to see at firsthand what was happening in the country.
The liberalization package is Mr. Monti’s second important piece of legislation after a €30-billion ($39.3-billion) austerity law last month focused on higher taxes and cuts to public spending intended to balance the budget by 2013. To reform the labour market is next. Trade unions oppose moves to make redundancies easier.
The latest package, which included approval of €5-billion in infrastructure spending, is meant to boost competition and to spur economic growth after a decade of near-stagnation. Italy fell back into recession in the last months of 2011. The International Monetary Fund forecasts a 2.2-per-cent contraction this year.
Economists say visible results from “Grow Italy” reforms will be long in coming – while Italy’s €1.9-trillion debt burden piles up.
“Although structural reforms are necessary to boost long-term growth, they will [probably]take several years to bear fruit and, in a period of economic contraction and government retrenchment, will have an adverse effect on short-term output, deepening the recession which will last through 2013,” said an analyst at Roubini Global Economics.
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