By Francesca Piscioneri
ROME (Reuters) - Italy's largest trade union called for a general strike over labor reforms on Wednesday, escalating a confrontation with Prime Minister Mario Monti that will test his resolve to push ahead with plans to transform the economy.
After weeks of negotiation, Monti announced late on Tuesday that the time for talking was over and he would press on with plans to overhaul employment protection laws dating back to the 1970s, despite stiff opposition from the left-wing CGIL union.
The CGIL proposed an eight-hour general strike to protest the measures, which would allow companies to lay off individual employees for disciplinary or business reasons, saying the changes risked causing massive job losses.
"This will not be a flare-up which burns out in a day as the government expects and we have a duty to get results before we see years of mass dismissals from companies," the union's secretariat said in a statement.
The strike would mark the biggest demonstration against technocrat premier Monti, a former European Commissioner who has already imposed painful cuts and tax hikes and an overhaul of the pension system since taking office in November.
CGIL head Susanna Camusso, a tough, gravel-voiced chain smoker and the union's first woman leader, has called a news conference at 1700 GMT to outline the union's position.
Employers welcomed the proposed changes to laws which they say discourage companies from hiring staff, hinder investment and condemn large numbers of young people to insecure, low-paid work with few rights.
Monti, a quiet grey-haired former economics professor, has unveiled his tougher, uncompromising side, saying while he was worried by the CGIL opposition he would not negotiate further now that he had the broad support of employers and the more moderate CISL and UIL unions.
"It's quite a profound change because it affects pretty much all issues relating to the labor market," Marco Venturi, head of the small business association Rete Imprese told Canale 5 television. "It was a long, drawn out discussion which ended with a conclusion which I think is quite satisfactory."
The reform plan unveiled on Tuesday went further than expected by weakening protections against dismissal not only in new employment contracts, as expected, but also for millions of people already in jobs.
The key reform to Article 18 of the labor code, a talisman for the unions of concessions they secured from bosses 40 years ago in the heyday of their power, will be presented to parliament after fine-tuning during the rest of this week.
The parliamentary process presents another challenge for Monti. The centre-left Democrat party, one of the main groupings he needs for his majority, has strong ties with the CGIL and risks a split between its more centrist and leftist wings.
Camusso has accused Monti and his administration of technocrats of bad faith in the negotiations.
While the reforms do not go as far as some labour experts had urged, if Monti is successful they will bolster confidence in his ability to push through the major changes that are needed to restore growth and reduce high public debt and unemployment.
The decision to forge ahead despite failed negotiations already marks a major change in past practice for Italy.
Appointed in November as financial market turmoil threatened to suck Italy into a Greek-style debt crisis, Monti has already moved to shore up public finances through a mix of spending cuts, tax hikes and an overhaul of the pension system.
Investors have been reassured by Monti's first months in government. Italy's benchmark bond yield has fallen to below 5 percent from highs of nearly 8 percent at the end of last year.
But they are nervous about Italy's economic prospects and are following the labour reform discussions closely.
More than 30 percent of 18- to 24-year olds in Italy 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.
Italy's economy is expected to contract by 1.5 percent in 2012, according to forecasts from the Bank of Italy, undermining hopes of cutting a public debt that amounts to 120 percent of gross domestic product, second only to Greece in the euro zone.
(Writing by James Mackenzie; Editing by Barry Moody and Anna Willard)