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To reboot Italy's economy, Monti takes on the cabbies

Italian Prime Minister Mario Monti has made liberalizing the service sector a key economic initiative, but the taxi industry is resisting.

By Clara Martinez TurcoContributor / March 12, 2012

A taxi sign is seen in Rome on January 23. Italian Prime Minister Mario Monti takes on the cabbies to reboot the country's lagging economy.

Alessandro Bianchi/Reuters

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Turin, Italy

Italian Prime Minister Mario Monti was brought into office to tackle the country’s immense debt and reform the lagging Italian economy. But resistance to his liberalization proposals shows just how difficult it may be for him to change entrenched economic practices.

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Just look at the taxi industry.

Mr. Monti, who was appointed last year after former prime minister Silvio Berlusconi’s resignation, immediately set out to cut spending and chip away at Italy’s debt, which was 120.1 percent of GDP in 2011. Now he has shifted his focus to growth, presenting his “Grow Italy” scheme for opening up the highly regulated service sector.

The taxi industry’s pushback is emblematic of larger problems. Monti aims to make it more competitive by easing the limits on the number of taxi licenses, which is expected to force city councils to lower service rates. His plan also addresses other professions with high barriers to entry such as lawyers, notaries, gas stations, pharmacies, and newsstands. The senate already removed some of his proposals during the amendment process.

“The liberalization decree, which covers a wide range of areas, also hit sectors that are less relevant to economic growth, but are emblematic of an old problem that the Italian economy has: the unearned income,” said Marcello Messori, professor of economics at the University of Rome 'Tor Vergata.' “It indicates that, for the first [time] in a long time, there is an intention to tackle this problem.”

The Monti administration says there are too many taxis, evident in the long lines of white cars on city streets that wait an average of 90 minutes before getting a customer – because rates are too high. If the number of licenses was increased, there would be more competition and fares would have to drop, increasing demand, the administration argues.

The senate approved a watered-down version of the proposal last week and it is now being discussed in the lower house. Major political parties, including Mr. Berlusconi’s center-right party, contested the effort by introducing more than 1,700 amendments. The economic measures are popular with the public, with 58 percent of Italians supporting them, according to a survey published by newspaper Corriere della Sera. But within the tightly regulated taxi industry the reduction of barriers to entry is considered catastrophic.

Reforms 'would ruin us'

Each city council sets the number of local taxi licenses, which only individuals can own. National laws stipulate that licenses must be obtained through either a public auction or from a cab driver willing to transfer his license. The price ranges from €50,000 ($62,280) in small cities like Bari to €300,000 ($403,650) in Florence.

Giovanni Maggiolo, president of the national UN.I.CA Taxi Filt/CGIL union and a cab driver in Milan, said that while city councils set the original price of a license, also known as a medallion, supply and demand determine its resale value.

To buy a license, many drivers go into debt, often mortgaging their home or their parents’ property, explains Pier Giovanni Bestente, president of the Radio Taxi 5370 cooperative, which represents 750 of Turin’s 1,600 cab drivers.

“Adding new taxi licenses would ruin us,” Mr. Bestente says. “It would further reduce the low amount of work we have while depreciating the value of the license.”  

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