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(See EXT4 <GO> for more on Europe’s debt crisis.)
Jan. 23 (Bloomberg) -- Italy is bracing for a wave of strikes from cab drivers, pharmacists and other service providers to protest Prime Minister Mario Monti’s plan to spur competition and growth that he will present to European Union allies today.
Cab drivers will strike today against plans to issue more taxi licenses today across the country, choking traffic in cities from Milan to Rome and leaving thousands of travelers stranded at airports and train stations. Pharmacists, truck drivers and gas station owners are among the other services threatening strikes in the coming week.
“The resistance to these reforms at a time when the economy is contracting is likely to be fierce,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London. “Opposition to structural reform in Italy is legendary. Mr. Monti knows these measures will be fiercely resisted, but is under enormous pressure to present an agenda for growth.”
Monti has pledged policies to spur an economy where economic growth has lagged behind the euro-area average for more than a decade. The premier has said that only by convincing investors the country can grow enough to shrink its 1.9 trillion-euro ($2.5 trillion) debt will Italy be able to withstand the fallout from the region’s sovereign crisis that led Greece, Portugal and Ireland to seek bailouts.
Monti will present the growth package at a meeting of euro- region finance ministers in Brussels today. The plan attempts to reduce barriers and boost competition in all aspects of the Italian economy.
“Competition and liberalization doesn’t mean we are introducing the law of the jungle to help the economy, but in our vision, eliminate barrier above all for the young,” Monti said.
The government will license an additional 5,000 pharmacies, 500 more notaries and permit the opening of more service stations. Lawyers and other professionals won’t be able to set minimum or maximum fees and will have to offer estimates for their services.
The package will also include measures to reduce natural gas prices, lower car insurance costs, speed the selloff of local services, make it easier to get public works projects off the ground and reduce bank fees and commissions.
Italy’s Antitrust Authority has said that a gradual opening of the professions may add an estimated 1.5 percent a year over the next decade or more to the $2.3 trillion economy. By combining such measures with policies to eliminate barriers to business and commerce, Italy could boost productivity 14.1 percent over 10 years, the Paris-based Organization for Economic Cooperation and Development has said.
Italy may be in its fourth recession since 2001, after the country’s growth averaged 0.2 percent annually in the decade to 2010, compared with 1.1 percent in the euro area. The credit rating of Italy, the region’s third-biggest economy, was cut two levels on Jan. 13 by Standard & Poor’s to BBB+, two steps above junk status, after Italian bond yields soared past the 7 percent level that led to bailouts for Greece, Ireland and Portugal.
The yield on Italy’s benchmark 10-year bond has fallen by 91 basis points in the past two weeks to 6.25 percent as Monti pushed ahead with his economic overhaul and as demand for bonds was boosted the European Central Banks lending 489 billion-euros to the region’s banks last month for three year.
Monti, who heads an unelected government with a term limit of just more than a year, is racing to overhaul the Italian economy and slash Europe’s second-biggest debt. The government last month passed 20 billion-euros of austerity measures to eliminate the budget deficit and today talks begin with unions on revamping the country’s rigid labor laws. The government has also pledged a package in the coming weeks to cut red tape.
The growth plan was passed by Monti’s Cabinet by decree and must be voted on by parliament within 60 days to remain in effect. So far, Italy’s biggest political parties have backed Monti’s efforts, though resistance to his policies may build as elections draw closer. Former Prime Minister Silvio Berlusconi, whose resignation in November led to Monti’s appointment, said on Jan. 20 that he was prepared to come back.
“Monti’s medicine hasn’t had any result,” Berlusconi told journalists in Milan. “We expect to be called back to govern because we were democratically elected.’
--Editor: Dick Schumacher
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