Italian gov’t backs down on taxi license reforms

By Giuseppe Fonte and Steve Scherer ,Reuters

ROME — Italian Prime Minister Mario Monti’s government on Wednesday backed down on a plan to free up taxi license distribution that was part of his deregulation package meant to cut costs and boost growth in the eurozone’s third-largest economy.

The government accepted a bipartisan amendment that allows city mayors to retain their power to issue taxi licenses, Industry Under-Secretary Claudio De Vincenti said. The amendment cancels Monti’s bid to put the distribution of licenses in the hands of a national transport authority, which would be less susceptible to powerful local taxi lobbies.

“Every government that has tried to liberalise taxi services has failed,” said Alberto Mingardi, director of the Istituto Bruno Leoni, a Milan-based free-market think tank. “Though a taxi liberalization wasn’t going to solve Italy’s growth problems, it would have showed that this government had made a break with the past,” he said. Monti took over from former Prime Minister Silvio Berlusconi in November with Italy on the front line of the eurozone debt crisis and the yield on the 10-year benchmark bond (BTP) at 6.65 percent and rising. After a month in office, he passed a 33-billion-euro “Save Italy” budget that cut pension spending, raised taxes and reduced state outlays, and slowly yields started to come down. In the meantime, Italy sank into recession, and the International Monetary Fund expects the economy to contract in both 2012 and 2013. The “Grow Italy” liberalization package was meant to underpin confidence in the country’s ability to boost its potential growth rate.

Now with the yield on the 10-year benchmark at 5.5 percent, and Time magazine slapping Monti on its cover with the headline “Can this man save Europe?” the political pressure to support difficult but needed reforms is diminishing.