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Monti Takes Ax to Mussolini-Era Guilds to Spur Italy Growth

Monti Takes Axe to Mussolini-Era Guilds
Mario Monti, Italy's prime minister, speaks during a news conference at the London Stock Exchange Group Plc (LSE) headquarters in London, U.K., on Wednesday, Jan. 18, 2012. Photographer: Chris Ratcliffe/Bloomberg

Prime Minister Mario Monti’s Cabinet will pass a plan today designed to boost competition and spur economic growth by targeting Italian professional guilds, some of which date to the Fascist era.

The package, Monti’s second major legislative effort since last month’s 30 billion-euro ($39 billion) austerity plan, will facilitate access to and reduce the privileges of many so-called closed professions, such as notaries. It seeks to improve competition by having Eni SpA sell off gas-transport unit Snam Rete Gas SpA. Monti’s Cabinet is meeting in Rome to pass the plan.

The legislation “contains measures to reduce rents and privileges, which also include the professions, pharmacies and public services,” Monti told a Jan. 18 news briefing in London. The new package aims to “distribute sacrifices needed to boost economic growth.”

Monti, who as European Union competition commissioner blocked General Electric Co.’s $47 billion takeover of Honeywell International Inc., is lobbying European leaders to commit to growth policies as the euro-area economy slips into a recession amid a wave of austerity measures demanded to fight the debt crisis. Monti has said jumpstarting the expansion is vital to cutting the 1.9 trillion-euro debt of Italy, whose economy may shrink 1.5 percent in 2012, the Bank of Italy said on Jan. 17.

Growth Boost

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.

“Italy runs the risk of transitioning from a recession to a lasting period of stagnation, and only an epic effort on growth-enhancing reforms can materially change this prospect,” said Vladimir Pillonca, an economist at Societe Generale SA in London. said.

Il Duce

Italy’s 28 professional guilds, many of which were set up under dictator Benito Mussolini, take a different view. The measures would seek to boost competition and lower costs by eliminating fixed minimum rates for service providers such as architects, engineers and notaries. The decree may also lead to increasing the number of taxi licenses.

“I’m very worried they want to liberalize taxi licenses and give everyone a chance to work, but without basic regulation or professionalism,” Andrea Erhauz, a taxi driver from Trieste, said at a protest of cab drivers against the measures this week in Rome. “Everything at the moment is regulated, but I think it will become wild.”

The guilds, which first arose in medieval Italy, became a key part of Mussolini’s state “corporations” that grouped all facets of the economy by industry. In a 1933 speech, the leader known as “Il Duce” said it was a “disciplined economy, and thus a controlled one, because one can’t think of a discipline that isn’t controlled.”

Institutional Nepotism

The guilds were meant “to protect citizens from possible abuse by professionals by setting and enforcing high standards,” said Franco Stefanoni, author of the “The Real Untouchables,” a book about the guilds. “Nowadays, that function is reduced and research shows their members are often the children or relatives of members.”

Gabriele Noto, an official at the notaries’ lobby, said that only 17 percent of his profession are relatives of notaries. He also defended relatively high fees for notaries compared with countries such as the U.S., saying the so-called robo-signer mortgage-document scandal couldn’t happen in Italy.

“We have faith in the government, which we know is working to improve Italy,” Noto said, while opposing a “lowering of notary standards” that could lead to “fraud and lawsuits that have a social cost in the end that taxpayers must bear.”

With a jobless rate of about 30 percent among Italians between the ages of 15 and 24, Monti’s package seeks to make it easier to join professions. The decree would create 1,500 new notary jobs through 2014.

Monti Yields

Italian borrowing costs have fallen since Monti took over from former Premier Silvio Berlusconi on Nov. 16, when the yield on the nation’s 10-year benchmark bond was 7.37 percent. The yield was 6.38 percent at 10:35 a.m. Rome time, pushing the difference with equivalent-maturity German bunds to 454 basis points, compared with a record 576 basis points on Nov. 9.

“This is a chance in a lifetime that Italy has to introduce and adopt much-needed structural reforms,” Salvatore Zecchini, a former executive director at the International Monetary Fund and a professor at Rome’s Tor Vergata University, said in an interview today on Bloomberg Television.

Under drafts of the decree published by newspaper Corriere della Sera, operators of gas stations were to be given the right to purchase gas from any supplier, a change that may not be included in the final version, according to operators’ unions, which yesterday threatened to hold a 10-day strike in protest.

The legislation also simplifies rules for oil and gas exploration to promote development of domestic resources. Offshore drilling will be allowed in some instances, though not in protected areas and at least five miles from the coast, the draft said.

The decree goes into effect immediately after its passage by the Cabinet, and Parliament must approve it within 60 days for the law to remain in force. Andrea Giuricin, economist at Bruno Leoni Institute in Turin, said he’s concerned that it may be watered down by lawmakers.

“The resistance in Parliament may be huge because many lawmakers are part of the same categories that have to be liberalized,” he said. “But we have to push forward with these reforms to modernize the country.”

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