Monti Moves Away From Austerity to Boost Growth
Italian Prime Minister Mario Monti plans to unveil a package of growth-stimulating measures at a meeting of European Union finance ministers on January 23.
The measures, meant to revive Italy’s flatlining economy, include loosening the powers of professional guilds and changing labor laws to encourage both hiring and firing. Monti is also raising pressure on Europe to shore up the euro against continued speculative attacks.
Monti said he hopes to “create more space for competition and merit in varying sectors” by “reducing protection and the different ways that industry sectors…try to create advantages for those who are inside the fortress to the detriment of those who are outside.”
Monti is faced with reducing Italy’s public debt, which is at 120 percent of gross domestic product, while simultaneously attempting t0 boost growth, a task that often requires measures detrimental to deficit-reduction efforts.
Monti’s interim government of unelected technocrats has no constituency to protect, and will therefore focus on pushing through changes that would force various entrenched interests, from labor unions to professional guilds, to give up their privileges — changes that might have cost a regularly-elected politician his premiership.
The government will 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,” said Monti.
Monti hopes to restore international confidence in Italy after years of his predecessor, Prime Minister Silvio Berlusconi, not being taken seriously by his peers. But a $40 billion package of austerity measures has not calmed markets, and on Monday, the differential in yields between Italian and German sovereign debt rose to more than 5 percentage points in a sign that investors still lack confidence in Italy.
But Monti and his government do not expect to solve their problems entirely on their own, and believe that, unless Europe comes to an agreement on how to shore up the euro, 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,” said Corrado Passera, Italy’s new minister for economic development, infrastructure, and transport.
Still, Monti must convince Europe that Italy is committed to structural change and must convince Italian interest groups that resisting those changes would put the entire euro zone at risk of collapse — and he must do so before his austerity measures plunge Italy into a deeper recession.
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