Italy’s reforms

The Iron Monti

The Italian prime minister faces big protests against liberalisation

Jan 28th 2012 | ROME | from the print edition

Taxi drivers, pharmacists—who is next?

MARIO MONTI, Italy’s prime minister, is set fair to become his country’s Margaret Thatcher. But who will play the role of the miners, whose strike represented the most serious challenge to the Iron Lady’s free-market reforms?

Angry victims of Mr Monti’s legislation have queued up for the honour ever since his government approved a wide-ranging package of liberalisation measures on January 20th. Taxi drivers held a one-day national strike to protest at a scheme to increase the number of licences. Chemists, who have a similar objection to a rise in the number of pharmacies, are to down pillboxes on February 1st. Lawyers, who oppose the abolition of minimum and maximum charges, plan a two-day strike later. There is a threat of industrial action by railway workers, upset by proposals to increase competition on commuter lines.

So far the most effective and damaging action has been taken by self-employed lorry drivers, whose real gripe is over the soaring cost of diesel. Fuel prices were pushed higher by an increase in excise duty in the Monti government’s emergency budget in December. Truckers are also protesting against an omission from the liberalisation package, which contained no plans to cut motorway tolls. If they staged a five-day stoppage, it could cost the country as much as €1 billion ($1.4 billion), according to the business daily, Il Sole-24 Ore. Blockades have stopped production at car plants and caused widespread food shortages. On January 24th a striking lorry driver was run over and killed by a German trucker, who was detained by police. There have been reports of beatings of lorry drivers who refused to back the strike. In Sicily there are claims that leaders of the protests have links to the Mafia.

Heady stuff for a government of professors and other distinguished technocrats. Can they really expect to win a trial of strength with Italy’s legendarily stubborn (and sometimes violent) vested interests? The lack of professional party politicians in Mr Monti’s government may turn out to be its strongest suit. That means it is not beholden to powerful lobbies (though some Italians see the prime minister, who was once an adviser to Goldman Sachs, as a representative of international big business, a charge he vigorously denies).

Another ace up the government’s sleeve is that, for the moment at least, its reforms are popular. Mr Monti claims that his liberalising measures will sweep away many “hidden taxes” that Italians pay on services because there is little or no competition among suppliers. That seems to have struck a chord. A poll for Corriere della Sera, a daily, found 58% support for his package. And, despite the pain it has inflicted, Mr Monti’s government has an approval rating of 52%. Fully 68% want it to stay in office until the next general election, due in early 2013.

Whether it does will depend on the political parties, because the government needs their backing in parliament for its survival. And their continued support will in turn depend, in part at least, on the public’s tolerance of Mr Monti’s reforms. Like Lady Thatcher’s, however, these will take time to have an effect.

One important change in the latest package is the hiving-off of Italy’s gas-distribution network from its majority owner, ENI, to create a level playing-field for competition. But this will take two-and-a-half years to complete, and the effect on consumer prices will not be felt until even later. An oft-quoted study by Confindustria and the Bank of Italy concludes that liberalisation of Italy’s services could add 11% to GDP. Less often noted is the study’s estimate that the benefits would take over 30 years to come through.

Already some politicians are drumming their fingers. On January 20th the prime minister’s predecessor, Silvio Berlusconi, declared that the cure devised by Mr Monti’s technocrats had not worked and that he and his ministers “expected to be recalled to occupy the government positions [they] had before”.

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One of Italy’s biggest issues facing nowadays is the reforms of the new Prime Minister Mario Monti.  He wanted to erase the country’s brand of being one of the most slow-growing economies in the world.  As people say, he aimed to draw Italy away from the border and lead it to the track of progress by implementing transformations into the economic situation of the country.

            Liberalization in the economy is a good way of not just improving the country’s financial system but to the public consumers and the idea of running of the government as well.  It opens and invites investors to put up businesses.  This manner can be another source to increase Italy’s revenue.  The more investment, the more taxes the country could collect funding different government agencies.  The budget allocation of these departments at some point can suffice and give better services and projects for the people.

            Another end product of Monti’s agenda is competition between companies from big to small and local to foreign.  These competitions in businesses prevent firms from increasing the prices of their products, unless the hike is reasonable.  And instead, give the Italians the lowest possible price to attract or get the interest of buyers.  Also, people have an array of goods to choose what they want.  One thing with Monti’s reforms as said is that it averts companies from committing tax evasion due to the few or even no competition in their businesses.  It is a right time to really exercise the law in these matters.  Many investments will make the government more careful in doing the legal processes to assure that these firms will truly abide to the terms and conditions and the rules set by the government.  With that, Italy would be able to get what is due for Italy.

            Additional ventures to be put up in the country can create more job opportunities for the people.  It reduces the unemployment rate and stabilizes the economy.  But to some Italians competition is not a good idea.  They want to stick with the existing trend of the economy to protect their personal interests.  Open trade can lead to deterioration of their sales which they fear and big companies could not easily do manipulation in the market.  The general public in opposition to the Monti’s schemes protested trying to insist what they want.

            Monti’s reforms in overhauling Italy are idealistic.  This undertaking requires a long period of time to accomplish.  But it is not too far to achieve if the implementation is well and fairly handled, and the implementers have no other agenda, only the welfare of the country and its people.  Like Monti, he chooses not to please the citizens, disregard their public opinions for the good of the many yet in exchange is the more robust and secure country. 

On the other side, old political parties are just supporting him because he is on the seat.  They want him to do the dirty job; all they care about are protecting their popular names and power not the general public. Though Monti has only a short period in realizing his plans, the will he has is unwavering.  He responsibly stands in his decisions and labeled as the “Iron Monti”.  Commentators say it’s too late for Monti to do actions but as the proverb goes, “It’s better late than never”.  It takes a lot of risk in pursuing his reform, but when will they take the move?  Setting aside other political leaders’ personal agenda and support the call for change will end to the country’s woes.