POST-BROADCAST CLARIFICATION: This story neglected to mention that the Italian Culture Ministry had weighed in on the debate. The ministry rejected elements of architect Rem Koolhaas' design and sent it back to Benetton for revisions, which are under way.
STEVE INSKEEP, HOST:
In Europe, Italy is among the countries fighting a full-blown recession, which may explain this move. In Venice, the trendy Italian clothing-maker Benetton is turning a building along the Grand Canal into a shopping mall. The idea is to create more jobs, and also take the costly management of the centuries-old building off the public's hands.
But as Christopher Livesay reports, the prospect of commercializing such a treasured historical site has many locals fuming.
CHRISTOPHER LIVESAY, BYLINE: A gondolier sings: Old Venice, you're always the same.
UNIDENTIFIED SINGER: (Singing in foreign language)
LIVESAY: But that may not be the case for long. A new development plan calls for Dutch architect Rem Koolhaas to overhaul the Fontego dei Tedeschi, a medieval warehouse that once bore frescoes by Titian and Giorgione. It overlooks the Rialto Bridge and the city's oldest open-air market.
(SOUNDBITE OF WHISTLING)
LIVESAY: Merchants here are exasperated. Francesco Vianello has run a fruit and vegetable stall for 47 years.
FRANCESCO VIANELLO: (Through Translator) Whether you're for it or against it, the powerful are going to get what they want, anyway. Just wait and see: In a few years, there won't be anyone left here. Ten years ago, there were twice as many vendors in this market. Now, small businesses are fleeing.
LIVESAY: Benetton officials defend the economics of the shopping-mall project. Federico Sartor is the company spokesman.
FEDERICO SARTOR: OK, which alternative should be possible, realistically? The idea is to have an economic activity, because an economic activity is a positive asset for the city, to have something that is working, making money, that is giving 400 new jobs.
LIVESAY: Benetton is not the first fashion house to step in to save one of Italy's crumbling monuments.
Last year, Tod's - the Italian luxury leather goods company - signed a $36 million deal to restore the Colosseum when the city of Rome came up short.
But what's happening in Venice is different. Recently, the owners of Gucci, Prada and Benetton have all restored historic buildings here.
But unlike the Colosseum - which still belongs to Rome - in Venice, these buildings now belong to Gucci, Prada and Benetton.
PAOLO LANAPOPPI: Everything becomes how much do you pay.
LIVESAY: Paolo Lanapoppi says deep pockets don't have to consider things like added value for the public good, especially during the euro crisis. He's with the Venice chapter of Italia Nostra, a non-profit dedicated to protecting Italian heritage.
LANAPOPPI: The problem is, if you look at Venice during the last 20 years, you see that it's slowly being transformed into a big shopping center for foreigners. Last year, we had 30 million - 30 million - tourists, 89,000 per day in a city of 60,000.
LIVESAY: Just 30 years ago, the population of Venice was 120,000, twice what it is today, and the steady plunge shows no signs of slowing.
Critics like Lanapoppi argue that the euro crisis is a red herring. The real issue, they say, is that Venice relentlessly caters to tourists' needs, while locals watch the city they knew vanish.
CAMILLA SEIBEZZI: And this is really a problem.
LIVESAY: Camilla Seibezzi is a city councilwoman. She says that tourism has gotten out of control in Venice. But even she is in favor of the Benetton project because, she says, it's the only economically feasible option at a time when the government is under heavy pressure from international creditors to cut city budgets and use the savings to help pay back billions of dollars in loans.
SEIBEZZI: We have a big problem in Italy, and especially in Venice, because to preserve the heritage costs so, so much. But this is not a good excuse. In a couple of year, we will have nothing else to sell. So what are we going to do?
LIVESAY: Seibezzi would like to see more resources devoted to other industries that would foster a sustainable way of life. But tourism has the strongest lobbies.
In the meantime, Seibezzi says she's working to make sure Benetton and architect Rem Koolhaas respect the historic integrity of the building. Stopping the project, she says, won't halt the exodus of citizens or stem the rise of tourism.
But there's a growing unease in Venice and the rest of Italy over what further compromises might be in store for a country unaccustomed to change, but forced to face it.
For NPR News, I'm Christopher Livesay.