Italy's Monti labor reform must be passed swiftly

Reuters News
Posted: Apr 04, 2012 5:09 AM
Italy's Monti labor reform must be passed swiftly

MILAN (Reuters) - Italy's labor reforms must be passed quickly if they are to convince creditors the country is serious about changing the shape of its economy and putting its public finances straight, Prime Minister Mario Monti warned politicians on Wednesday.

Monti pushed through an initial round of cuts swiftly last year but opposition from unions and the centre-left to reforms has grown as financial markets eased some of the pressure on Italy and moved their sights in Europe's debt crisis to Spain.

With that in mind, analysts and investors are scrutinizing the technocrat government's progress in passing the labor market changes, seen as crucial to efforts to create a new model for economic growth in Italy.

In an interview with the daily La Stampa, Monti said the proposals, which would make it easier for companies to fire employees, would be presented to parliament in essentially the same form as they were approved in cabinet last month.

"For the overall impact of the reform, it is not just the contents which are important but also the speed with which parliament undertakes the examination it has to," he told the newspaper.

He called on leaders of the centre-right PDL and the centre-left Democratic Party (PD) which support him in parliament, saying rapid approval of the bill would give an important signal to bond markets, still nervous about Italy's capacity to pass economic reforms needed to stimulate growth.

He addressed a particular appeal to PD leader Pier Luigi Bersani, who opposes key parts of the reform, alongside the CGIL, Italy's biggest union and a traditional ally of the left.

"We consider that the time for consultation with social partners is over, we know that every party has its hinterland in terms of partners and culture, but I think that every leader will have to use his capacity for leadership," he said.

The CGIL has pledged a campaign of industrial action including a one-day general strike against the proposals, which Monti says are needed to bring more flexibility to Italy's rigid labor market.

Attention has focused on Article 18 of the labor code, which severely restricts the ability of companies to lay off workers on permanent contracts and which Monti says has discouraged companies from taking on staff.

The CGIL and critics on the left say the proposed changes will do nothing to encourage new hiring and will leave large numbers of mainly younger workers stuck on dead-end short term contracts offering few prospects or benefits.

In the La Stampa interview, Monti also repeated that Italy would not need new austerity measures as it has left itself enough room for maneuver to reach its objective of balancing the budget in 2013.

"We have a very ambitious objective but we have left ourselves some wiggle room and that's why we really don't believe that a possible worsening of the real economy imposes a new (austerity) package," he told the Turin-based daily.

The Financial Times quoted a confidential European Commission report on Tuesday which suggested that Rome's deficit reduction targets could be at risk from recession and high interest rates and that further consolidation measures might be needed.

Monti said the budget target was based on a forecast for sovereign debt yields at 7 percent during 2012, substantially higher than current levels, and did not include possible revenue increases resulting from a clampdown on tax evasion.

(Reporting by Michel Rose and James Mackenzie; editing by Patrick Graham)