By RACHEL DONADIO
Published: January 9, 2012
ROME — Ahead of a series of critical meetings with European leaders, Prime Minister Mario Monti has pledged to introduce measures to revive Italy’s long-dormant economy but is also raising pressure on Europe to shore up the single currency against continued speculative attacks.In an interview on national televisionon Sunday, Mr. Monti said he would unveil a package of growth-enhancing measures — in particular, loosening professional guilds and changing labor laws to encourage hiring and firing — at a meeting of European Union finance ministers on Jan. 23.
“We want to create more space for competition and merit in varying sectors,” he said in an interview on the state-owned Rai national broadcaster. “That involves reducing protection and the different ways that industry sectors, in Italy more than in other countries, try to create advantages for those who are inside the fortress to the detriment of those who are outside.”
Italy is facing the twin, and in some respects conflicting, imperatives of lifting growth while reducing its public debt, which is at 120 percent of gross domestic product, the highest in the euro zone after Greece.
Mr. Monti said that his government of unelected technocrats was determined to force various entrenched interests — from labor unions to professional guilds to public employees — to give up their privileges, and that it was uniquely qualified to push through the changes because it had no natural constituency to protect.
“Traditionally, one political party chooses to protect a category, and another political party another category, but a weird government like the one I have the honor to lead, is not part of these political geometries,” Mr. Monti said. He added that the government could ask Italians “to disarm the privileges that, in the short term, give everybody a sense of security, but that, in the long run, could sink Italy’s ship.”
Since he replaced Prime Minister Silvio Berlusconi amid market turmoil in November, Mr. Monti has sought to restore international confidence in Italy and raise its profile in Europe, after years when Mr. Berlusconi was not taken seriously by his peers.
But even regime change — and a $40 billion package of austerity measures, including tax hikes and a sweeping pension overhaul — has not calmed markets. On Monday, the differential in yields between Italian and German sovereign debt rose to more than 5 percentage points, before dropping slightly, a sign of a lack of investor confidence in Italy and, perhaps, in the euro zone leadership.
Certainly, Italian officials do not believe they can or should be expected to solve their problems entirely on their own. In an interview with the daily Corriere della Sera on Sunday, Italy’s new minister for economic development, infrastructure and transport, Corrado Passera, said that unless Europe came to an agreement on how to shore up the single currency — such as by allowing the European Central Bank to become a lender of last resort like the Federal Reserve in the United States, a move Germany staunchly opposes — the crisis will continue.
“Either Europe should decide to give itself the tools that every currency has, meaning a central bank able to guarantee liquidity and stability, or there won’t be any growth, there won’t be any employment,” Mr. Passera said.
Mr. Monti’s television interview was part of a publicity blitz ahead of a scheduled meeting in Berlin on Wednesday with Chancellor Angela Merkel of Germany. Last week, Mr. Monti met with France’s President, Nikolas Sarkozy, in Paris and later this month he is expected to meet with Prime Minister David Cameron of Britain.
But although Mr. Monti has won over many Italians with his steady hand and flashes of wry irony, he faces continued resistance from the political parties that are nominally supporting his government but are eager to capitalize on rising popular discontent about new tax hikes and an immediate raise in the retirement age.
Mr. Monti must also carry out a delicate balancing act. With the clock ticking before the austerity measures plunge Italy into a deeperrecession, and with the unemployment rate rising and businesses warning of a credit crunch, he must convince Europe that Italy is committed to structural changes — and convince entrenched Italian interest groups that if they resist those changes, the entire euro zone runs the risk of collapse.“Up to now, Monti has done something important — the pension reform was important. But he hasn’t yet done a lot on the policies for growth and this is the challenge that awaits him now,” said Tito Boeri, a professor of economics at Milan’s Bocconi University, where Mr. Monti was rector until becoming prime minister.
“There’s still awareness in the political class that the situation is really difficult and no one today can allow itself to bring down the Monti government,” Mr. Boeri added. But he said the “the biggest risk” is that the government stays afloat, “but he isn’t able to do too many things.”
Mr. Monti and his ministers have said that Italy will move ahead with liberalizations in the gas, energy, commerce and transport sectors, as well as loosening restrictions on the country’s myriad guilds — for lawyers, notaries, pharmacists, taxi drivers, among many other professions — that are the gatekeepers to the Italian job market.
Those reforms are expected meet with the howling resistance not only of labor unions but of entrenched parts of the Italian ruling class.
Both labor unions and business leaders are calling on the government to inject liquidity into the Italian economy to prevent a credit crunch from worsening.
Fulvio Fammoni, the secretary of the Cgil, Italy’s largest labor union, said that the government should focus on creating jobs, not on reducing protections for workers and cutting back unemployment benefits. “In Italy the problem isn’t firing, it’s in preserving jobs,” he said.
But even as the government negotiates structural changes, including to labor laws, there are other worrisome signs in the Italian economy. Since last week, shares in one of Italy’s largest banks, Unicredit, have dropped more than 37 percent, prompting fears of a shakeup in Italy’s banking system, which has so far weathered the debt crisis storm. Unicredit holds more than $52 billion in Italian sovereign debt.
Business leaders are calling on the government to help rein in Italy’s public debt by liberalizing local authorities and other sectors to help raise growth, so that businesses will not be strangled by Italy’s copious red tape and lack of credit.
Gaia Pianigiani contributed reporting.
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