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|Because Italy can do it|
La Stampa - November 13th 2011
The President of the European Council, Herman Van Rompuy, surely got it right when he said on Friday that “
The limit to the “fundamentals” argument begins with the fact that when the problem is a crisis of confidence in sovereign debt, these strengths are almost irrelevant. The issue is the fact that
Private wealth and low corporate indebtedness is relevant to that only if they mean that the government can raise more taxes from the private sector or persuade savers to buy more government bonds. Yet the most relevant “fundamental” fact shows why that is hard:
The “good fundamentals” argument is, however, correct in the way President Van Rompuy used it:
No one, least of all Professor Monti, will expect this to be easy. The easier part, in fact, will be cutting the budget deficit more quickly than the plans that have now passed through Parliament. The strong, national sense of financial crisis will make sure that that effort will command support, at least for the next few months, despite the inevitable protests against this cut or that cut. Ideally, that early austerity should also be made part of a longer-term framework for cutting
The problem for the new government will, however, be similar to Greece’s: fiscal contraction may be necessary to restore investors’ confidence and reduce
So what is needed is a combination of austerity and of reform that plays to the country’s true strengths, making growth likelier. The life of the Monti government is likely to be too short for it to be able to implement a really profound programme of reform. But it could push things in that direction as well as arguing a clear, public case for reform. Then, whichever government is elected in 2012 or 2013 would be in a better position to carry it out.
Reform requires consensus to be built and a vision of a better future to be shared. That, I believe, is what Mayor Valentino Castellani achieved in
Belief in such change also requires examples of success, of companies that have built themselves into not just national but also global leaders and can inspire others. Too often, commentary on Italian success limits itself to small and medium-size manufacturers. Many are excellent, but it is not enough to have excellence in a sector that represents just one-fifth of the economy. Nor are small companies often capable of competing globally. So what is needed is success more widely across all the country’s business sectors, and the establishment of bigger companies.
The examples are there, in new sectors as well as old ones: Luxottica’s leadership of the world market in sunglasses and Ferrero’s in chocolate, but also Technogym’s in health clubs, Autogrill’s in mass catering and duty-free retailing, and Rainbow’s in children’s animation.
What these companies also show, however, is that the obstacles to growth are many and various. And, since they are exceptions, they show how much the obstacles prevent other companies from emulating them. Labour laws that discourage firms from hiring workers in
The sort of reform programme that is needed to unleash
Such consensus will also be essential for the major reform to labour laws that is required, to achieve a unified labour market, combining flexibility and security. That will need collaboration between the government, trade unions and the employers’ federations, which is never easy. Yet it was done before, to remove the scala mobile, so it could surely be done again.
The biggest effort will need to be the painstaking removal of rights and privileges that impede competition and innovation. In “Forza, Italia”, I proposed that a new Italian government should contact a man who had just compiled a report for the European Commission on how to deepen the European single market, ask him to do the same exercise for Italy, and then put him in charge of implementing it. The man’s name was Professor Mario Monti. He will now have to find someone else to do that job, but at least he will know what he wants to be done.