Analysis: Europe's reform drive risks running out of steam

Wed Mar 28, 2012 11:05am EDT
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By Paul Taylor

PARIS (Reuters) - European leaders are caught between former White House chief of staff Rahm Emanuel's injunction "You never want a serious crisis to go to waste" and Luxembourg Prime Minister Jean-Claude Juncker's admission that "We all know what to do. We just don't know how to get re-elected after we've done it."

Signs of reform fatigue are growing in euro zone countries as bond market pressure for a radical budget and economic overhaul has eased slightly. While several governments have pushed through changes in pension, employment and welfare systems that would have been unthinkable before the currency area's debt crisis, the reform push is losing momentum in the face of political resistance.

Italy's unelected prime minister, Mario Monti, made a veiled threat to quit this week for the first time in an attempt to force through a shake-up of labour laws intended to make it easier for companies to fire workers. Monti warned Italians that his team of reforming technocrats might not stay in office until a 2013 election if trade unions and politicians picked his plan apart.

"If the country, through its labour organizations and political parties, does not feel ready for what we consider a good job, we would certainly not seek to keep going just to reach a particular date," he said.

An opinion poll by the ISPO agency published on Sunday showed two-thirds of Italians have a negative view of the reform agreed by the cabinet last week, and Monti's own approval rating fell sharply as a result.

Significantly, Monti chose to put the legislation through parliament as an ordinary bill, which will take months of deliberation and possible amendment, rather than forcing it through by decree as he has done with pensions reform.

Other moves to liberalize professions and boost competition have been watered down by powerful interest groups such as taxi drivers and lawyers.

At the same time, Spanish voters denied conservative Prime Minister Mariano Rajoy the outright victory he had sought in the southern region of Anadalucia as a mandate to pursue bolder fiscal and structural reforms.   Continued...