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Fixing Italy's Pain Drives a Cabbie to Despair

While austerity measures — cuts in social benefits such as pensions and health care — are unpopular with the citizens of Europe, they haven’t seen anything yet.

Piazza Venezia, Rome, Italy
Panoramic Images | Getty Images
Piazza Venezia, Rome, Italy

As the European financial crisis moves into its next phase, there’s a new word to learn: “liberalization,” and it's likely to be even more unpopular than “austerity.”

Leaders in Europe are promising to “liberalize” their economies in an effort to grow those economies, but they face an enormous wall of vested interests that don’t want anything to change.

Take the case of Simon Galina, a 38-year-old taxi driver in Rome. His profession is one of many in Italy likely to undergo “liberalization,” and he doesn’t like it one bit.

Liberalization is a very big problem. It’s a big problem for him because he took out a $185,000 loan ten years ago to purchase a taxi license and he still has five years of payments left. He’s worried that if the government changes the rules now, it will likely be much more difficult for him to pay it back.

Right now the number of taxis in Italian cities is tightly controlled by the local governments. If liberalization really does occur there will no longer be a cap on the number of cabs, and the cost for a license will fall dramatically, if not to zero. Bottom line, it’s going to be a lot easier to get into the taxi business. (Economists call this lower barriers to entry.)

That will be good news for Italian consumers: It’s going to be easier to find a cab, and cheaper to boot. But falling fares mean less income for Galina, and there’s that monthly loan payment he will still have to pay regardless.

The government has already begun this process in Athens, Greece, and it has led to tremendous violence as drivers protest the changes. Now imagine this change writ large across an entire society where hundreds and hundreds of professions have the same decades-old pay-to-play fee structure. Italian Prime Minister Silvio Berlusconi and Finance Minister Giulio Tremonti promised to do just that on Friday night. Berlusconi agreed to the measures in exchange for the European Central Bank buying Italian debt on the open market, and acting as a buyer of last resort.

Economists believe liberalization will lead to more jobs, which means higher economic growth and more tax revenue, exactly what countries like Italy need to pay back their debts.

Galina is torn — he realizes he has a vested interest in keeping Italy the way it has been.

”I know that liberalization is good for the economy because they give a job for the other people, but it’s a big problem for us,” Galina said.

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