Bloomberg News

Monti Targets Italy Labor Law Revamp as Jobless Youth Join Trapped Fireme

March 12, 2012

Mario Monti, Italy's prime minister. Photographer: Jock Fistick/Bloomberg

Mario Monti, Italy's prime minister. Photographer: Jock Fistick/Bloomberg

Riccardo Coladarci, a firefighter in Rome for seven years, is trapped and says now it’s time for him to be saved. His temporary job contract doesn’t offer sick days or vacation and pays about 9,000 euros ($12,000) a year, barely enough to make ends meet in Italy.

“I’m not even entitled to a flame-resistant shirt,” the 29-year-old Rome resident said about his employment agreement.

Young Italians are the have-nots of a two-tier job market that Prime Minister Mario Monti is seeking to overhaul to boost employment and growth in the euro area’s second most-indebted economy. While mostly older workers enjoy open-ended contracts with strict limits on firing, young laborers often make do with short-term deals that leave them as the first to go when employers cut costs amid Italy’s fourth recession since 2001.

Coladarci is on a rolling contract that expires every 20 days, while his mother has kept her state job for more than three decades. “Things were very different” before a surge in public debt in the 1980s choked economic growth, he said. “My family was able to buy a house and send my brothers and me to school.”

Monti’s labor plan may prove his toughest task since taking office in November, after helping to restore investor confidence in Italy with 20 billion euros of austerity measures and steps to boost competition and cut red tape. A decade ago, unions mobilized millions of workers to quash a similar labor law overhaul by former Premier Silvio Berlusconi, after militants murdered two economists who sought to ease rigid firing rules.

Talks Resume

The government, unions and employers have been locked in talks on a deal since January, and Monti has pledged to impose changes if a negotiated deal isn’t reached this month. The negotiations led by Labor Minister Elsa Fornero resume today at 4 p.m. in Rome.

“We have to get away from a dual labor market where some are overly protected while others totally lack protection,” Monti, a former European Union competition commissioner, told Parliament after being appointed on Nov. 16.

Burdened by 1.9 trillion euros in debt, or 120 percent of gross domestic product, Italy’s economy has lagged behind the rest of Europe, expanding an average 0.4 percent annually in the 10 years through 2010, compared with 1.2 percent in the euro region. The jobless rate rose to 9.2 percent in January, the highest since 2001, with about a third of youth out of work.

“We just keep getting doors slammed in our face,” said Veronica Montuschi, a 26-year-old from Rome who’s still looking for a job a year after graduating in political science. “We do a thousand interviews, we never get a job offer.”

Jobless Benefits

Monti, aided by the European Central Bank’s unlimited three-year loans to banks, has helped steer Italy out of the eye of the debt-crisis storm. The yield on Italy’s 10-year benchmark bond was 4.89 percent at 3:17 p.m. in Rome, down from a euro-era high of 7.26 percent on Nov. 25.

Monti’s plan envisages boosting the prospects of young Italians and women by easing firing rules, encouraging the use of apprentice contracts and increasing jobless benefits. The part of the labor code known as Article 18, which bans firing without just cause and forces employers rehire and compensate workers deemed unfairly released, is the thorniest issue.

“Weakening it wouldn’t improve economic efficiency, but send the message that ‘anything goes,’” Susanna Camusso, head of the biggest union, CGIL, told RAI television on Feb. 19.

Employers say the law, passed in the 1970s, discourages hiring by making it harder to reduce staff when business sours.

The government’s “idea is to lower the cost of firing” and “increase productivity, economies of scale and output growth,” Silvio Peruzzo, an economist at Royal Bank of Scotland Plc in London, said in an e-mail. “If the reform goes through, it will be easier for Italians to find a job in the future.”

Economists Murdered

Berlusconi backed down from his attempt to revamp Article 18 in 2002 after millions took to the street in protest. The demonstration came four days after Marco Biagi, a government adviser on labor law, was gunned down on Father’s Day outside his home in Bologna. The killing was claimed by the New Red Brigades, which took their name from the 1970s terrorist group, and followed the group’s 1999 slaying in Rome of another labor expert, Massimo D’Antona.

Concerns about violence remain. Envelopes with bullets addressed to Fornero, union leaders and employers’ lobby head Emma Marcegaglia were intercepted by mail workers in January.

Lack of Protests

So far this time there have been no large protests over the overhaul proposed by Monti, who took over amid a record surge in Italy’s borrowing costs as contagion from the Greek crisis threatened to break up Europe’s single currency union.

Montuschi, the university graduate, said young workers no longer identify with traditional labor interests. “The unions only protect workers under a permanent contract,” she said. “They couldn’t care less about those still looking for a job.”

To boost hiring, the government wants to encourage the use of apprentice contracts that provide greater protection than most temporary contracts, while offering reduced benefits and lower pay than permanent jobs. When they expire, the company can choose to walk away or retain the employee full-time.

The government also seeks to ensure more workers can receive jobless benefits. Currently, most benefits are reserved for employees of large companies through special funds known as CIG, which subsidize reduced hours or temporary layoffs.

Forecast Recession

Fornero has said she wants to curtail the use of CIG as a social buffer for workers with little hope of further employment. She said last month that the new system may not be introduced until next year due to the economy, which the European Commission forecasts will contract 1.3 percent in 2012.

The overhaul may provide as much as 2 billion euros for income support to workers who have lost their jobs, newspaper Repubblica reported today, without saying how it got the information.

Caterina Gurzi, 55, an assembly line worker at a Fiat SpA car factory in Turin, has received CIG funds for more than a year, and under Monti’s pension revamp, she will have to work longer to retire. Still, her jobless daughter, 31, has it worse, she said.

“She’ll never get a pension,” Gurzi said in an interview. “The thinking used to be to take away from the parents and give to the kids, but now it seems to be the exact opposite.”

To contact the reporters on this story: Chiara Vasarri in Rome at cvasarri@bloomberg.net

To contact the editor responsible for this story: Jerrold Colten at jcolten@bloomberg.net;


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