Italy's Renzi pushing labour reform, but skepticism growing

Unjust labour system divides workers into first, second divisions

ROME (Reuters) — Prime Minister Matteo Renzi said on Tuesday he would force through changes to Italy's labour laws with special emergency measures if parliament dragged its feet, and rejected criticism his government was moving too slowly with its reform agenda.

Renzi, under growing pressure to back his promises with action, said that reforms to an unjust labour system that divided Italian workers into "first division" and "second division" categories would be at the heart of the programme.

He said the government would work with parliament to cut through the thicket of regulations covering employment as long as the reforms could be passed soon enough but indicated it could also push through a special decree of its own.

"Otherwise, we are ready to intervene with emergency measures, because when it comes to jobs, we can't waste another second," he said in parliament.

With youth unemployment running close to its highest level since the 1970s at around 43 per cent and the economy in its third recession since 2008, stimulating job creation is an urgent priority for Renzi, who has promised a sweeping "Jobs Act" in the coming months.

The grim climate he faces was underlined on Tuesday by forecasts from employers' lobby group Confindustria, which forecast the economy would contract by 0.4 per cent this year, matching a forecast on Monday by the Organisation for Economic Cooperation and Development.

Confindustria forecast Italy's huge public debt would climb to 137 per cent of economic output this year. That is almost 25 points higher than the forecast of 112.6 per cent for this year when Mario Monti became prime minister in 2011.

Renzi, who has promised spending cuts of around 20 billion euros next year to ensure Italy respects EU budget rules, said the next budget planning document, due next month, would contain resources to simplify and reinforce welfare measures for workers who lost their jobs. At the same time, he said, the government would cut payroll costs for companies.

The address to parliament came in response to growing criticism that Renzi's government had made little progress with the reforms it promised when it came to office in February. However he offered few specifics in a speech of just under an hour. Renato Brunetta, floor leader of Silvio Berlusconi's opposition Forza Italia party, said Renzi had offered no more than "empty words and hot air".


Successive Italian governments have promised to reform a labour market that guarantees extensive rights to workers on full-time, open-ended contracts but leaves an increasing number in insecure, temporary jobs with little protection.

Renzi offered little detail about the labour reforms he is proposing but he has been careful to avoid a battle over the symbolic issue of Article 18 of the labour code, which protects workers in larger companies from unfair dismissal.

The actual significance of Article 18 is much disputed, with many economists pointing out that it affects no more than a few thousand workers every year. But it has become a totemic issue both for unions concerned about worker rights and for centre-right politicians who see it as a symbol of the inefficiencies of the labour market in Italy.

Implicitly rejecting criticisms that the government had focused too much on constitutional reforms rather than measures to revive the economy, Renzi said change had to come on a broad front.

"Either we get all the reforms done together or we won't get past the snail's pace that has stopped us growing for 20 years," he said.

Renzi said the government would push on with constitutional reforms aimed at making government more efficient, reshaping the electoral law and overhauling a justice system blamed for chronic delays and uncertainty.

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