During his first two months in office, Monti pushed through increases in sales, wealth and property taxes to close a widening budget gap. He proposed sweeping deregulation of industries and professions that were closed to new competitors or price competition. He sought an end to Italy’s dual labor market, with its shrinking pool of older, permanent employees who were guaranteed lifetime employment, irrespective of performance, and a growing cadre of younger workers hired on temporary short-term contracts. He accelerated reform of a pension system to push back retirement ages and better tie payouts to contributions. And he began a serious crackdown on Italy’s widespread tax cheating, requiring all large cash purchases to be reported by merchants and sending revenue agents to favorite vacation spots in highly publicized raids. After two months, his favorability rating was more than 70 percent.
It remains a matter of debate whether Monti’s subsequent compromises and backsliding on several of these initiatives led to a sharp decline in his popularity or whether the inevitable decline in popularity emboldened the political parties and special interests to balk at approving them. Some of his most ardent supporters now wonder if Monti made a mistake by not threatening to quit if the political parties that had recruited him didn’t enact his program in total. But even as half-measures, his initiatives are significant reform in a country that has resisted it for so long and remains largely skeptical of the value of competition.
Steven Pearlstein is a Pulitzer Prize-winning business and economics columnist at The Washington Post.
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Monti is now trapped in something of a political Catch-22. With elections only a year away, the politicians and established parties know they can stymie further changes by running out the political clock. But if he were to try to extend his electoral mandate by cobbling together a new party — something he originally promised not to do — Monti would run the risk of appearing to be just another scheming politician and jeopardize his still-considerable public support.
One of Monti’s strongest backers is Giuliano Amato, twice a former caretaker prime minister and one of the wise men of Italian politics. Sitting in his frescoed office around the corner from the Pantheon a few days ago, Amato explained that creating a more productive Italian economy will require much more than simply changing laws and regulation. It will mean changing the culture of the country as well.
Bound by family ties
That must start with the family, which dominates Italian business the way it dominates so many other aspects of Italian life.
More than in any other of the advanced economies, business in Italy remains family businesses, from the smallest farms and trattoria to some of the largest supermarket chains, industrial groups and fashion houses. Starting companies comes naturally — Italy remains one of the most entrepreneurial countries in the world. But relatively few grow to be very large, and even those that do tend to remain private, relying on family members to fill all key positions and on retained earnings for capital, supplemented by loans from friendly local bankers.