Monti takes on lobbies in fight to modernize Italy

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By COLLEEN BARRY and VICTOR L. SIMPSON, Associated Press

ROME (AP) — Fresh bread on Sundays.

It may not sound like a call to revolution, but it has come to symbolize Mario Monti's campaign to reshape Italy as a modern economy, as the reformist premier takes on powerful lobbies that have stifled economic growth by keeping swaths of the economy in the hands of insiders.

These groups have long behaved like Medieval guilds — regulating standards, working hours and prices — and Monti now has a lengthening list of enemies that include bakeries, taxi drivers, pharmacists, lawyers, notaries, railroad workers and newsstand dealers.

In one bold stroke last month, Monti issued a decree that overturns decades of arcane rules that have coddled many of the small businesses that represent an outsized portion of the Italian economy. Bakeries will be able to open on Sundays and holidays, opening the way for fresh competition to established shops. The notoriously closed taxi industry will be liberalized. Rules preventing pharmacies from setting up close to one another are being lifted.

"We want to create more space for competition and merit," Monti declared.

Monti's mission is stirring waves of anger that indicate a tough battle ahead: Past Italian leaders have tried and failed to bust lobbies in the past — finding the old way of doing things simply too entrenched.

Since Monti issued his decree on Jan. 20, taxi drivers have staged strikes to protest plans to issue more licenses; angry truck drivers have erected blockades against increased taxes on fuel; even normally mild-mannered pharmacists, objecting to an expansion of drug stores and working hours, plan walkouts.

Monti and his new team of economic experts, named to succeed the discredited Silvio Berlusconi when Italy's debt crisis began to spin out of control in November, first enacted stiff austerity measures to tackle the emergency.

A second sheaf of measures announced this year was aimed at reviving growth. That put him straight into the path of entrenched interests — unions, public employees and professional organizations — that have for decades cast a long shadow over politics and the economy.

In many ways, these lobbies go to the heart of what makes Italy tick.

Italian professions have long been protected by systems of patronage, personal favors and backroom dealing. Defenders of the Italian way say that keeping business closed to outsiders guarantees quality and tradition — think fine wines and tailor-made suits. Critics counter that it stifles innovation, entrenches corruption and leads to stagnation.

Monti, an economics professor and former EU competition commissioner is being likened to Margaret Thatcher, who earned her the nickname Iron Lady by taking on labor unions as part of free market reforms that many say modernized Britain but also left it deeply divided and scarred by strife.

Italy's small business lobbies have had a stifling effect on Italy's economy by blocking competition, keeping work hours short and perpetuating deep inefficiencies in business practices.

For example, most pharmacies are closed Saturday afternoon and all day Sunday. Newspapers are only sold at newsstands. Gas station owners in Italy have been barred, with the exception of some highway stops, from selling anything but petrol products, which many argue keeps gas prices in Italy among the highest in Europe.

Monti said the aim is to reduce protectionism and the way industry in Italy "tries to create advantages for those who are inside the fortress to the detriment of those who are outside."

Like in the Middle Ages, professions are handed down from generation to generation within the family, reflecting both tradition and the lack of social mobility that Monti wants to address. And Italy has remained stubbornly provincial, with regional quotas on notaries, taxis and pharmacies.

While commentators have hailed Monti's program as revolutionary, many working men and women have rejected his ideas, reflecting the difficulty of change in this highly conservative country.

"Monti sounds good, he wants to spur employment by giving out more taxi licenses," said 62-year-old Mario Parisi as he drove his cab across the Tiber River in Rome. "But more work for others means less work for me and I am only making euro2,000 a month."

The voice of business, the newspaper Il Sole 24 Ore, is praising Monti's efforts, pointing out that "in less than 20 words" — the length of his edict on bakeries — the government has changed the history of business in Italy by allowing breadmakers to work seven days a week.

So far, at least, the reform package appears to be proving popular with the public. A survey published this week in the leading Corriere della Sera shows Monti with a 57 percent approval rating. The margin error on the telephone poll was 3 1/2 percent.

Monti has remained remarkably impervious to public and political pressure. The technocrat has made clear that since he was not elected, he does not have to pander to voters or parties seeking favors, while keeping an open door to the sectors he is seeking to reform.

After meeting with taxi drivers, the government did compromise on some measures. For example, if more licenses are issued, drivers who already have one will receive "tangible" compensation.

A new government authority will decide city by city whether the number of taxi licenses should be raised or reduced, instead of issuing one rule for all. That already gives wiggle room for the powerful taxi lobby to fight for the status quo.

Still, Monti has stood firm on the idea that removing privilege and opening sectors to greater competition can spur the economy.

Growth — which in Italy has been stuck at zero for a decade — is viewed by economists as the best way to bring down Italy's dangerously high public debt of euro1.9 trillion, or 120 percent of GDP.

Italy is expected to enter a recession this quarter. The International Monetary Fund forecasts the Italian economy will contract in 2012 by 2.2 percent, while the Confindustria industrial lobby puts the shrinkage at 1.6 percent.

One of the most corrosive effects of the pervasive clubbiness of Italian industry has been the way it keeps young people out of work. Italy is increasingly known as a gerontocracy that entrenches older generations in plum jobs. The nation has suffered an alarming brain drain as talented young people move abroad in search of work. One Italian in four under 30 is not studying, working or in training.

"More competition also means more opening, more space for the young, less space for privilege and more recognition for merit," Monti told a press conference announcing the reforms. "It is not just a big economic operation, but also a big social action."

But most Italians, for the moment, are worried about losing what they have — not about the possible longer-term gains of painful reforms.

A new study produced by the Bank of Italy indicates that Italian families are poorer than just two years ago, and also carry more debt.

Monti refuses to place all the blame on the politicians who preceded him.

"Are we citizens doing our duty to help Italy grow?" he recently asked.

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