The Rome government's Grow Italy plan to deregulate the service sector and boost the economy is so weak after the latest amendments in parliament that it reinforces the image of a country that is unreformable, according to a leading free-market think-tank.
The package was already timid when it was presented by Mario Monti's technocrat government on January 20 and it has become even more so after being watered down in parliament, the Bruno Leoni Institute said in a statement.
The result is disappointing and means that yet again Italy will be seen abroad as a country which is unreformable because it is hostage to vested interests, both large and small, the Institute's director Alberto Mingardi said in the statement on Tuesday night.
The package, which contains measures affecting sectors such as pharmacies, taxis, banks and lawyers, is expected to be put to a confidence vote in the Senate on Thursday and must be definitively approved in the second half of March.
Having already been fiercely debated in parliamentary committees, it is unlikely to be significantly changed when it moves to the Chamber of Deputies after Thursday's Senate vote.
The Institute, comprising pro-market economists and commentators, gave a cautious welcome to the package when it was originally presented but said it had been weakened rather than strengthened in parliament.
Monti presented the Grow Italy plan a month after winning parliamentary approval in December for a Save Italy austerity package worth around 33 billion euros (27.8 aimed at balancing the budget in 2013 and heading off the euro zone debt crisis.
He said reducing the privileges of professional bodies and opening up sheltered sectors of the economy could mitigate the recessionary effect of the austerity plan and help Italy's medium term growth prospects.
The package was widely welcomed abroad, both by Italy's European partners and the head of the Paris-based Organisation of Economic Co-operation and Development. Monti has reversed a collapse in market confidence in Italy which brought the country to the brink of economic disaster in November.
However, several early government proposals, such as easing some firing restrictions and deregulating discount sales in shops, were dropped when the package was approved by the cabinet, and many other measures have been partly dismantled in parliament.
Monti depends on support from a grand coalition of parties ranging across the spectrum from centre left to centre right and they have diluted many of the measures to protect their supporters.
Parliament for example scrapped a norm obliging lawyers, architects and other professions to provide a written cost estimate to clients before taking on a job.
Taxi drivers, whose militancy made them a symbol of resistance to the package, won a battle to have the allocation of new licences decided by mayors, over whom they are considered to have considerable influence, rather than an independent transport authority, as the government originally proposed.
On the other hand moves to reduce Italian banking fees, the highest in the euro zone, have been strengthened, with lower commission charges and the introduction of virtually free current accounts for low-income pensioners.
The government is still negotiating with employers and trade unions on more broad ranging reforms to the labour market.
(Reporting by Gavin Jones; editing by Barry Moody)