Bloomberg News

Italy to Revamp Labor Laws Even Without Unions, Fornero Says

February 03, 2012

(Updates with comments by union leaders, employers starting in second paragraph. For more on Europe’s debt crisis, see {EXT4 <GO>}.)

Feb. 2 (Bloomberg) -- The Italian government will push ahead this month with a plan to overhaul labor-market rules even if it fails to win the backing of unions and employers, Labor Minister Elsa Fornero said.

Fornero told union leaders and employers at a meeting in Rome today that Prime Minister Mario Monti’s government will approve the new rules with or without their support and that negotiations need to be concluded within three weeks, according to two union officials at the talks. The government should be more “cautious” in its rhetoric, CISL union leader Raffaele Bonanni told reporters in Rome after Fornero’s comments.

Employers and unions remain divided on how to spur hiring in an economy where youth unemployment tops 30 percent. Changing labor laws to make them it easier for companies to shed workers can’t be “taboo,” Monti said last night in an interview on Canale 5’s “Matrix” show.

The code in the labor law known as Article 18 that bans firing without just cause and forces employers to rehire and compensate workers deemed to be unjustly released, “can be pernicious in some circumstances,” Monti said. Unions oppose any attempts to weaken Article 18.

Italy last month passed 20 billion euros ($26 billion) in tax hikes and spending cuts and a package of measures to spur competition and growth, helping push the yield on the country’s 10-year bond to the lowest in almost four months. Changing labor laws may prove more challenging than those efforts. Previous attempts to modify Article 18 have led to national strikes, even assassinations.

Biagi Murder

Marco Biagi, an economist and consultant to the government on labor-market changes, was gunned down in March 2002 outside his home in Bologna by remnants of the Red Brigades terrorist group. His killing followed the murder of another consultant on labor-market reform in 1999.

Envelopes containing bullets and addressed to Fornero, union leaders and Emma Marcegaglia, head of employers lobby Confindustria, were intercepted by the postal service earlier this week, Ansa newswire reported on Jan. 31.

Employers say the law makes them reluctant to hire because it makes it hard to reduce staff during tough economic times. “We’re in a situation now where permanent jobs no longer exist -- and we must acknowledge that,” Marcegaglia told a press conference in Rome after the talks.

Jobless Benefits

Article 18 was one of the sticking points at today’s meeting, the second the government has held with unions in less than two weeks. The government made “encouraging” pledges to broaden jobless benefits during the talks, which will resume in about a week, CGIL union leader Susanna Camusso said, adding that the pledges would be empty without additional resources.

The revamping of the labor laws aims to reduce what Monti has called the “terrible apartheid” between workers who have total job security and those trying to break in to the market.

Article 18 was implemented in the 1970s, and critics say it has contributed to creating a two-tier job market where workers covered by the rule can’t be fired, while employers increasingly use short-term contracts with no security to avoid paying for workers’ social contributions.

The government recognized that some “bad” forms of job flexibility exist, Camusso said. The government’s position “is a step forward” and can help lead to “useful solutions,” she told reporters.

“The real problem now is not how to fire people, it is how to create more jobs,” Camusso said.

--Editors: Jeffrey Donovan, Andrew Davis

To contact the reporter on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.ne


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