Italy seeks cuts, unions threaten strikes

Reuters News
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Posted: Jul 03, 2012 9:22 AM
Italy seeks cuts, unions threaten strikes

By Giuseppe Fonte

ROME (Reuters) - Italian Prime Minister Mario Monti, his standing strengthened by winning EU backing for a sovereign bond-buying scheme by Europe's bailout funds, on Tuesday outlined job reductions and other public administration cuts, provoking strike threats from the powerful labour unions.

Monti outlined cuts that include overall personnel reductions of 10 percent and a 20 percent slash in the number of state managers, without giving a timeline, a source present during a meeting with local authorities told Reuters.

"Be careful of creating social conflict," Susanna Camusso, leader of Italy's largest labour union, the Cgil, said before meeting the prime minister.

Camusso said a unified general strike by all the unions in favor of jobs "must be used." Raffaele Bonanni, the head of the second biggest union, said on Monday that he was ready to call a nationwide general strike if cuts were indiscriminate.

After taking office in November to prevent a Greek-style default on Italy's debt mountain, Monti enjoyed a honeymoon with Italians that waned when he clashed with unions over his labour market reform, which parliament passed last week, and as tough austerity measures kicked in.

The spending cuts, needed to head off a scheduled increase in sales tax in October, now threaten to sour relations between government and unions yet further.

By winning support for the bond-buying scheme at last week's EU summit, Monti strengthened his political support at home - which had looked increasingly unstable - and this week's rush to pass spending cuts is aimed at building on his new momentun.

Deputy Economy Minister Vittorio Grilli called the cuts "urgent", adding that Italy was still "under special surveillance" at a European level, according to a source present at Tuesday's meeting with local authorities.

At a meeting with regional government officials earlier in the day, Monti said the cuts would be permanent and would be worth more than the originally announced 4.2 billion euros for this year because of the need to raise emergency funds for May's earthquakes in the northern region of Emilia-Romagna.

The value of the 2012 cuts could be as high as 7 billion euros, sources told Reuters last month.

Apart from reducing personnel levels, the government plans to further centralize the state's purchases of goods and services - in particular for health care - and to close secondary offices.

The aim is to head off a 2-percentage-point increase in value-added tax that is otherwise scheduled to come into force in October.

(Additional reporting by Catherine Hornby. Writing by Steve Scherer, editing by Tim Pearce)