News analysis: top story
Italy's economy
Taking off the shackles
Jan 25th 2007 | ROME
From Economist.com
Italy needs courageous new efforts to deregulate its economy and clear away petty rules
FINALLY it seems a serious effort is being made to open up Italy’s hidebound economy. On Thursday January 25th Italy’s cabinet discussed how best to clear away some of the bureaucracy and rules that hold Italian businesses back. The economy has repeatedly underperformed the rest of the euro zone in recent years, largely because business is strangled both by red tape and the pervasiveness of informal, anti-competitive pacts.
Not that the path ahead will be easy. Two of the most senior ministers in Romano Prodi’s centre-left coalition are acrimoniously at odds over how far, and how fast, to go. The original plan was for the cabinet to discuss a bill drafted by the economic development minister, Pierluigi Bersani of the formerly communist Democrats of the Left. Mr Bersani took an initial stab at deregulation last summer. As a result Italians can now, among other things, buy non-prescription drugs in supermarkets, purchase a second-hand car without calling in a notary public and close their bank accounts without paying for the privilege.
Having taken a penknife to the thicket surrounding Italian business with his first bill, Mr Bersani had let it be known he planned to apply the shears with his second. However the first indications of his new plans, according to leaked details, indicate a piecemeal approach. Big commercial outlets may now get the right to sell petrol, while existing petrol stations may finally be allowed to stay open around the clock. Some particularly petty rules, such as government regulation of the number and location of tobacconists, or a ban on insurance agents marketing the products of more than one insurer, may now be scrapped.
Most importantly perhaps, Mr Bersani would scrap the rules setting a minimum distance between rival businesses that limit competition in much of the retail sector. Such restrictions apply to cinemas, news-stands, beauty parlours, hairdressing salons and even driving schools. Other measures put forward by Mr Bersani are less a matter of liberalisation and more about protecting consumers. One plan is to abolish a surcharge imposed on the topping-up of a pre-paid mobile telephone card. Another scheme is to force airlines to advertise only the full price of a ticket.
All this may be well and good as far as it goes, but his limited proposals would not clear the real logjams at the centre of the Italian economy, especially in important sectors like energy and transport. That at least is the view taken by Francesco Rutelli, one of Mr Prodi’s two deputy prime ministers and the leader of the moderate, liberal wing of his heterogeneous coalition.
As details of Mr Bersani’s second package have become known, Mr Rutelli is said to have told associates that a bill targeting hairdressers and petrol-pump attendants was “simply ridiculous”. Mr Prodi’s restive deputy set up himself as the champion of the deregulatory cause last year, but has failed to make an impact on policy. Earlier this month he tried—and spectacularly failed—to get himself made the co-ordinator of the entire liberalisation process. The prime minister insisted that was his own role. But, as arbiter between the two wings of his coalition, the prime minister may be unsuited to the job.
Mr Rutelli’s latest move has been to table a rival bill to that of Mr Bersani. The main point is about monopoly-busting. It would hive off the gas and rail networks, apparently as a first step towards promoting genuine competition in both energy and transport. It would lift existing restrictions on airport retail services and make it easier for homeowners in search of a better deal to swap between mortgage lenders.
It remains to be seen which of the projects the cabinet will adopt—or whether ministers will opt to give parliamentary time to both. But there is a good chance that some sort of deregulation will be passed. Mr Prodi's coalition, though fragile, has been held together by the threat of Silvio Berlusconi returning to power if it falls. So some new measures are likely to make it to the statute book. Mr Bersani’s supporters complain privately that his disruptive adversary is merely seeking to shore up his credibility. But if Mr Rutelli can succeed in stiffening the government’s deregulatory resolve, he will have helped to affirm a principle his rival ought heartily to endorse: that a dose of competition is good for everyone.
INES TABUSSO