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« A "German-dominated Europe" | Main | A Week to Thanksgiving »

Italy’s New Premier Offers Broad Plan to Reform Finances and Spur Growth

ROME — Mario Monti, the newly chosen prime minister of Italy, unveiled an ambitious growth-boosting program before the Italian Senate on Thursday, warning that Italy and Europe faced a moment of “serious emergency” and calling on lawmakers for national unity and responsibility – The New York Times.

At a time of international financial instability that is threatening the eurocurrency, and with the eyes of world markets on Italy, Mr. Monti, an economist and former European Commission member, said his government would work to change Italy’s labor market and pension system, fight tax evasion and make it easier for businesses to grow. But he also urged Europe to understand what is at stake if it leaves Italy to its own fate.

“The future of the euro depends on what Italy does in the next few weeks. Partly, not only, but partly,” Mr. Monti said, warning that “the end of the euro would unravel the single market, its rules, its institutions, and would take us back to where we were in the 1950s.”

At the same time, he urged lawmakers to back his “government of national commitment.” The Senate and the lower house were expected to give his government a vote of confidence later.

Mr. Monti said in no uncertain terms that Italy was in economic difficulty and needed to act fast to strengthen its own finances and by extension shore up the euro. It was a marked change from the tenor of the previous government, under Prime Minister Silvio Berlusconi, in which acknowledgment of Italy’s economic woes was considered disloyalty, and where as recently as two weeks ago Mr. Berlusconi said that Italy was a wealthy country where “restaurants are full of people.”

By contrast, Mr. Monti said Italians could expect to make sacrifices in the months ahead, but pledged that those sacrifices would be fair, and evenly spread. Such measures would involve changes to the labor market and welfare benefits, and to Italy’s lopsided pension and fiscal systems.

Addressing what he called a fundamental cause of Italy’s low growth, he said the government would work to grant young people and women greater access to the workplace. “They are the two great wasted resources of the country,” he said.

He said the government would work to restore market confidence in Italy in the short term and to invest in structural changes that would help in the longer term, including changes to what he called Italy’s “inequitable” pension system.

“We need to focus on three pillars: fiscal rigor, economic growth and social fairness,” Mr. Monti said.

To spur growth, he said Italy must deregulate closed professional guilds, opening them to competition, as well as improve the efficiency of public sector services.

Striking a statesmanlike tone, Mr. Monti also said that because citizens were being asked to sacrifice, cuts to the costs of elected officials as well as public administration would be “unavoidable.”

He also indicated that to bring Italy more in line with European norms, his government would probably have to reintroduce a property tax on first homes, a tax that had been scrapped by Mr. Berlusconi’s government.

Mr. Monti also pledged to fight Italy’s vast underground economy, which he said was estimated to be worth a fifth of the annual gross domestic product, and to tackle tax evasion, a task that he said would lead to the reduction of fiscal pressure on businesses and fixed-income employees and pensioners.

Mr. Monti did not try to sanitize the challenges facing Italy. Growth has lagged for a decade, he said, youth unemployment is higher than in other European countries, and the disparity between the wealthier north and the poorer south has narrowed only slightly.

Markets have been hammering Italy in recent weeks, driving up borrowing costs to levels that have caused other euro zone countries to seek bailouts, on concerns about Italy’s longer-term ability to repay its enormous debts.

Mr. Berlusconi was forced to resign on Sunday when it became clear last week that international investors had lost confidence in his government’s ability to push through reforms demanded by the European Union. Mr. Monti was recruited to replace him in record time, and on Wednesday, President Giorgio Napolitano swore in the new government, which consists mostly of academics, bankers and top-level civil servants, all experts in their fields.

Commentators in Italy welcomed Mr. Monti’s speech.

“He gave a political framework,” said Stefano Folli, a political commentator for the daily business newspaper Il Sole 24 Ore.

Mr. Folli said Mr. Monti’s message was that “Italians will have to make fairly serious sacrifices, but that those will be compensated for by a government that wants to restore a sense of the state and trust in institutions.”

While respected abroad, the Monti government is more problematic internally, where many factions in Parliament, most notably the one led by Mr. Berlusconi, speak of it as an imposition born of financial markets more than democratic processes.

In his speech, Mr. Monti reiterated that his government had not subverted the role of politics. Instead, he said that he hoped its apolitical nature would help Parliament regain a measure of concord after a particularly tumultuous period and “reconcile citizens and institutions to politics.”

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