Monti's moment of truth, facing trade unions

Reuters News
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Posted: Mar 20, 2012 3:28 AM
Monti's moment of truth, facing trade unions

By Steve Scherer

ROME (Reuters) - Mario Monti will walk into a meeting with Italy's trade union bosses on Tuesday, knowing it can help make, or break, his brief tenure as prime minister and his attempts to drag the economy out of the mire.

Four months after he was summoned from an academic semi-retirement to rescue Italy from a Greek-style debt crisis, the former European Commissioner sits down at 3:30 p.m. (1430 GMT) to try to weaken labor leaders' defense of long-cherished legal protections for employees which he argues have contributed to chronically low employment rates and minimal economic growth.

Monti, who turned 69 on Monday, has already won acclaim at home and abroad for taking action where his billionaire predecessor Silvio Berlusconi had, in the eyes of many, offered little more than rhetoric and distraction.

At the head of a government of technocrats installed with the approval of European Union partners - and Italy's creditors - Monti has already forced through a 33-billion-euro austerity package to try to stop the rot in public finances. He has made Italians swallow sharp cuts in future pension provisions and done away with a swathe of regulations on service businesses.

But, for many, Monti, who has made labor market reform a priority for his government since the outset, faces a first big moment of truth on Tuesday when he tries to deliver on a promise to broker an agreement on labor market reforms.

Failure to persuade union leaders, who fear they may have already given too much away in the atmosphere of national emergency, could mean mass strikes and ructions within Monti's left-right parliamentary coalition.

The prime minister has vowed to press on with reforms regardless, setting a deadline of the end of the month for trying to reach a workable compromise. And whatever happens on Tuesday, the arguments are likely to rumble on.

The meeting is being closely watched by investors as an indicator of how far Monti can go, and how fast.

Employers complain that regulations, many dating from the 1970s high-water mark of trade union power, are discouraging them from taking on new staff and stifling productivity.

"We're running the last mile," said Corrado Passera, the banker Monti brought into government in November as industry minister. "An agreement is within reach," he told reporters in remarks that are at odds with signals coming from some unions.

TWO-TIER LABOUR MARKET

Monti wants the unions to abandon rules that make it virtually impossible to fire workers for all but the grossest of misconduct - rules that he argues have contributed to a two-tier labor market, familiar across southern Europe, where older staff monopolize protected positions, leaving the young either out of work altogether or on precarious short-term contracts.

The metal-workers arm of the biggest union, the left-wing CGIL, has already laid down its marker for the day by calling on members to down tools for two hours of their own choosing during Tuesday. Leaders say they will not back down on rejecting Monti's proposed changes for newly hired staff to Article 18, a treasured achievement of employee protection law.

Other trade unions, which form part of a still substantial unionized workforce of 12 million, or one Italian in five, have sounded a more conciliatory note, however, and the unions failed on Monday to come up with a common line. "An agreement is very possible," UIL labor leader Luigi Angeletti said on Monday.

His price, however, remained a substantial climb-down by the government on proposed changes to Article 18, which are intended to let employers sack workers who fail to perform. "All that must be done is to change the hard line," Angeletti told La Stampa newspaper, arguing the changes had "absolutely nothing to do with the economy, with flexibility or with job creation".

More than 30 percent of 18- to 24-year olds are unemployed, and only about 57 percent of Italians have a job, giving the country one of the lowest employment rates in the euro zone, and also among the slowest economic growth on the continent.

Monti must bolster estimates of the potential growth rate if he is to convince markets that, in the long run, Italy can pay off its debt. So far the former academic economist has been highly successful in turning around market sentiment.

Italy's benchmark bond yield has fallen to below 5 percent from highs of more than 8 percent near the end of last year. But investors may start changing their opinions if Monti fails to pull off the reforms of labor markets he has promised.

(Additional reporting by Gavin Jones and Francesca Piscioneri; Editing by Alastair Macdonald)