By Steve Scherer
ROME (Reuters) - Recent retiree Susanna did all her personal errands on the government's clock, like the rest of her colleagues in Italy's state sector. Some picked their kids up from daycare, some met lovers for daytime trysts. Susanna did her grocery shopping.
"There were five entrances and exits, and everyone -- from the president to the department manager to the general staff -- would come in one door and walk out another," said the 63-year-old, who retired two years ago after 38 years in government.
"Serious workers are uncomfortable in the public sector because eventually everyone acquires bad habits," she said, and asked not to be identified beyond her first name to protect the colleagues she left behind.
Susanna's experience may go some way to explaining why Italians often emerge from the country's labyrinthine administrative buildings exasperated after hours spent waiting in line to complete a simple bureaucratic task.
One of Prime Minister Mario Monti's biggest challenges as he tries to trim the 1.8-trillion-euro debt and ram home measures that foster growth and competition will be cutting red tape and increasing efficiency in Italy's vast public bureaucracy.
While Italy's general government expenditure was 50.3 percent of gross domestic product last year, below the euro zone average and less than that of France, the quality of the public administration came in last in the euro zone, according to the International Monetary Fund.
"The lack of efficiency in the public sector obviously weighs on growth," said Giuseppe Pisauro, an economist at lavoce.info and head of a treasury-run school for public managers. "Improving the public administration would be a big boost to the country's competitiveness."
Monti has announced a comprehensive spending review to target the best places to make cuts, and admonished public administrators to take "inescapable actions aimed at containing costs" in the meantime.
He made clear he would be targeting the country's 110 provincial governments, which critics say have become havens for once-powerful potentates during the sunset of their career, or prized pulpits for small, locally based power clusters.
The provinces -- of which 15 new ones have been created in the past two decades and more are proposed -- spend a total of about 12 billion euros per year on services such as secondary-school administration, road maintenance and training for the unemployed.
An overhaul of the system would require time-consuming constitutional reform. Instead, Monti has proposed cutting in half the administrative staff, but not the services.
The government's most optimistic savings estimate is 65 million euros, which is just 0.2 percent of the value of the package. When the details of the decree emerged, it was clear that even these cuts were easier said than done.
"The way the law is written, it's clear that even these modest cuts may never get done," said Luigi Oliveri, a manager in Verona's provincial government who has worked for the state for 20 years.
"In the public administration, this is the wrong way to do things. You have to find the sources of waste before you can cut."
The problem is not just whether jobs are necessary but also how they are handed out. State jobs historically have been given
in exchange for political support before elections, or as favors to family and friends.
Franco -- who also asked that his last name not be used -- got a job at a state-owned bank in the early 1970s after his aunt asked her middle-school classmate, a former prime minister, to find him a job.
"My aunt had made the request two years earlier, and I had forgotten about it, but then the bank contacted me just before the national elections," said Franco, who retired after 32 years.
"There was a tacit agreement that if you asked for a job, and you got it, that you would vote for the politician who got it for you, and all your family and friends would also know about it and recognize it," he said.
Susanna got her first public job in 1971 because a distant cousin was in charge of the personnel department.
"The small public agencies were like clans back then," she explained. "Everyone had the same last name. Now it's more open."
More recently, local public transportation or trash-carting services have become bloated with political hires.
Five managers of Rome's local subway, train and bus company are under investigation for allegedly hiring hundreds of such personnel over the past decade. One such employee was a former night club dancer and pin-up girl who became the "personal assistant" of the company's industrial manager.
Italy's state sector provides education and law and order, and manages health-care and pension systems and a wide array of local services. In many of the cities and towns in Italy's underdeveloped south, the state is the top employer, and a quarter of all public spending goes to salaries each year.
The good news is that the bureaucracy has become visibly more efficient in recent years thanks to upgraded computer systems and the opening of large offices capable of offering a number of different services. Today most public workplaces have turnstiles that keep workers in their offices.
"There are some parts of the public administration where people believe in the service that they provide, and they spend long hours to do the best job possible," Italy's chief statistician Enrico Giovannini told Reuters.
Berlusconi's Public Administration Minister Renato Brunetta campaigned to modernize services and railed against "layabouts," increasing supervision of workers who called in sick. Monti has named career civil servant Filippo Patroni Griffi, Brunetta's former chief of staff, to be public administration minister.
Since the public sector has already been the focus of across-the-board cuts, Giovannini says Monti's spending review must be used to lay the ground for a complex and comprehensive reform of the public administration. Such changes will have to be carefully considered before being implemented, he said.
Salaries have already been frozen at 2010 levels until 2014. New hiring to replace those who quit or retire was reduced at most agencies by 80 percent. By 2014, the number of public employees should be reduced by 300,000, according to Treasury estimates.
With some services already cut to the bone, Monti won't have easy fixes, and changing some bad habits may be impossible. Even the use of computers has had unintended effects.
"One of the biggest ways to waste time in recent years became computer games," said Susanna. "Some people spent hours on end laying solitaire and poker."
(Editing by Sonya Hepinstall)