Italy's resigned PM Monti leaves legacy of reforms

MILAN, Italy - Since it took the helm of Italy when the debt crisis was spiraling out of control one year ago, the emergency government of resigned Prime Minister Mario Monti has introduced eight main packages of measures, of which 80 percent with immediate effects.

The first reform adopted in December 2011 was the so-called "Save Italy" austerity bill, a 40-billion-U.S. dollar stimulus package aimed to balance the budget and promote growth with measures supposed to kick-start the national economy and credibility.

Two thirds of the bill's new levies are on first homes - with the unified municipal tax (IMU) - and financial wealth, including repatriated capitals as well as luxury cars, boats and private planes.

The reform has ruled that both men and women retire for old age at 67 years, while all pensions have to be calculated with a contribution- rather than earnings-based method to reduce the number of high payouts.

In addition, the package includes moves to fight widespread tax evasion such as a new ceiling of 1,000 euros (1,318 U.S. dollars) for cash transactions and incentives for professionals and small businesses that implement full traceability for their revenue.

Functioning as a counterweight to the "Save-Italy" measures, the "Grow-Italy" decree adopted last January encourages competition throught more liberalizations in the Italian hyper-regulated services sector.

Among the first measures of the package, there is the liberalization of licenses and work hours, and enhanced competitiveness in various economic sectors.

The reform includes bureaucratic simplifications for opening business, public tenders and consumer class action, the abolition of professional tariffs and barriers to entry, and some liberalization for gas, electricity, petrol stations, insurance, banking, railways, motorways, airports and taxis.

Banks need to revise their system of commissions and fees, while encouraged electronic transactions help the traceability of money and disincentive the use of cash in order to reduce the impact of fiscal evasion on the economy.

Issued in February, the "Simplify Italy" decree was aimed at easing bureaucracy and enhancing competitiveness and meritocracy by facilitating the functioning of businesses.

The law has eliminated stages in procedures for the payment of fines, declaration of a residence change and renewal of a license, and streamlined the process for entrepreneurs participating in a tender.

It has boosted simplification of procedures for citizens and firms, public tenders and schools teachers, making it easier for young people to communicate with universities and start a new company.

The "Fiscal Simplification" decree adopted in March introduced a range of taxes news, from laying down the parameters for calculating the municipal tax on properties held abroad to enhancing the fight to tax evasion.

Italy's tax collection agency has the new task to compile and maintain a black list of evaders, while taxpayers who have not issued any fiscal receipts in several occasions will be inserted in selected lists.

The reform has also lowered the threshold of VAT compensations, imposed closing of inactive VAT numbers and introduced new rules on foreclosure and mortgage.

The "Sustainable Development" decree issued in June has introduced new measures to simplify and increase the possibility for the small- and medium-sized companies (SMEs) - the backbone of Italy's economy - to use new instruments for financing their operations.

Both medium and small unlisted companies will be given greater access to the money and financial markets, following up with previous legislative innovations aimed at improving youth entrepreneurship.

The decree also contains provisions concerning tax deductions and measures to support growth throughurban development, incentives for ecocars, house renovations and industrial restructuring.

The "Labor Law" adopted in July was driven by the objectives of clamping down on abuses of flexible work contracts and liberalizing individual layoffs for economic reasons, partly compensated by introducing a more generalized system of unemployment benefits.

The package favors apprenticeship contracts as the main gateway for youths to enter the job market, while contemplates some restrictions on fixed-term and semi-subordinate working relationship.

While temporary employment has become more expensive and limited, at the same time firms can dismiss their workers more easily, although firing for discriminatory reasons remains forbidden.

The reform provides a universal jobless-benefit program (ASPI) aimed at protecting workers in their period of unemployment while helping them find a new job.

With the "Spending Review" introduced between May and July, all government departments are required to reduce their expenditure on goods and services to ensure saving.

Various public bodies will be abolished, while a part of all civil service posts will be lost. In the health sector, hospital bed numbers will be also cut, while doctors are now required to indicate the active principle alone on prescriptions and not the name of any specific product.

The 2013 budget law passed on Friday, the last package approved before Monti handed in formal resignation late in the day, is expected to allow Italy to reach its objective of a balanced budget in structural terms next year.

The law contains innovative mechanisms providing some room to support low-income families, economic activity in various sectors and employment overall.

The budget also tables on a tax on financial transactions, currently being introduced in a few other euroarea countries, the so-called Tobin Tax.

Technical fiscal provisions in the banking and insurance sector were increased, while the expenditure cuts in the public sector will help support the achievement of much-needed productivity increases.

According to government data updated on December 15, 93 out of the 469 new regulations with no immediate effects, which are equivalent to 20 percent of the overall seven packages, have been actualized up to now.