Monti faces renewed pressure to speed reforms

Associated Press + More

By COLLEEN BARRY and VICTOR L. SIMPSON, Associated Press

MILAN (AP) — For the Italian entrepreneur whose business and marriage were falling apart, a tax bill was the last straw. Armed with a shotgun and two revolvers, Luigi Martinelli took 15 hostages at a government tax office last week, demanding only that his story be heard.

Italy has largely been spared the mass protests that have gripped Greece and Spain, but economic agony is starting to bite here as well. A spate of suicides by businessmen has called attention to the crisis. Martinelli's cry of despair struck a deep chord among Italians, many of whom felt sympathy as his lawyer spoke to cameras after the cleaning business owner released his hostages.

Mario Monti, hailed as a savior in November when he was named premier to tackle Italy's financial crisis, is feeling the sting himself as he comes under attack from all sides — variously described as a cold-hearted economist, a slave to the banks or a softie lacking the courage to push harder with reforms.

"Monti is out of alibis," the business daily il Sole-24 Ore wrote last week. "He needs to do just a few things, but immediately."

The resounding anti-austerity votes in elections in France, Greece and Germany's most populous state have piled pressure on Monti, who needs to placate an increasingly restive population while persuading markets that it's safe to lend to a nation whose public debt of nearly 2 trillion euros (about $2.6 trillion), the highest in Europe, amounts to a staggering 120 percent of GDP.

Adding to the urgency, Italy announced this week that it sank deeper into recession, its economy shrinking for the third straight quarter in its biggest contraction since 2009.

Bold action is critical, economists say, as Italy is seen along with Spain as a next possible target for a bailout. Economic meltdown in Italy, the EU's fourth largest economy, would endanger the entire European project — with potentially debilitating consequences for the global economy.

Monti, a former EU competition commissioner tapped to head a government of technocrats, is pushing structural reforms, such as liberalizing labor laws and busting business monopolies to stimulate growth and boost competitiveness. At the same time, in keeping with Europe's austerity push, he has raised taxes and cut spending.

Both prongs of his economic strategy entail pain, and have won him many enemies.

The normally unflappable premier is beginning to show signs of frustration.

"The human consequences of the crisis should lead to reflection by those who brought the economy to this state," he said recently, "and not be blamed on someone trying to find a way out."

Monti's efforts have been bogged down by entrenched lobbies that have been targeted by his reforms and risk being weakened in Parliament by lawmakers worried about how they will be judged in national elections next year. And a key measure to reintroduce a property tax on primary residences abolished by former Premier Silvio Berlusconi is facing fierce popular resistance by homeowners, about 70 percent of Italians.

Berlusconi, whose erratic leadership was widely blamed for deepening Italy's crisis, is no doubt enjoying watching Monti squirm. Reflecting on the headaches involved in bringing order to his famously unruly nation, the former premier himself lamented a few years ago that "the man who governs Italy has no power."

Unions, which by tradition set wages and contracts in agreement with the Confindustria industrial lobby, have fiercely opposed a measure that would make it easier to fire workers. The government watered down the measure, now in Parliament.

"I don't think he has backed down," said Giuseppe Ragusa, an economist at Rome's LUISS University. "I think he has found a very strong political opposition on anything he wanted to implement. Lobbies are very strong in Italy."

Monti received a vote of confidence Wednesday from the International Monetary Fund, which said Italy has made "notable progress" toward improving its financial outlook in the last six months.

But Ragusa argued that the government did not forcefully make the case that the measures on firing workers were part of a broader raft of reforms also aimed at establishing more long-term jobs and making it easier to create new jobs.

Among measures urged by il Sole is to unblock government payments to private businesses for services rendered, which routinely are delayed by months and even years, and have been cited as a factor in the recent suicides. It also urged the government expedite promised privatizations and explain the merits of the new property tax — which aims to collect €11 billion next year — to a skeptical public.

While the disenfranchised have taken to the streets in other crisis-ridden European nations, the downturn has hit Italy's economy in a spotty way — a key reason why the nation has yet to see a mass protest movement.

At the same time, the crisis is showing no signs of easing.

Unemployment rose to 9.8 percent in March, the highest in 12 years. Business failures have been rising for the last four years, and show no sign of slowing. In the first three months of the year, official data shows 3,000 businesses closed, up 4 percent from the same period last year.

The deepening woes are putting pressure on the parties supporting Monti in Parliament— all of which suffered setbacks in the recent elections. Berlusconi's party was hit particularly hard.

The biggest gains went to a movement founded by comic Beppe Grillo, whose agenda is to expose the abuses of the political caste. Mayoral candidates running under the Five Stars banner are headed to runoffs in the major cities of Genoa and Parma.

In the wake of the local election results, Democratic Party leader Pierluigi Bersani urged speedy help for businesses.

"Frankly, I don't understand the delays," Bersani told reporters in Rome last week.

____

Simpson reported from Rome.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.