Italy is at a potentially groundbreaking stage of reform, as the government of Prime Minister Mario Monti grapples with very controversial changes to labour laws.
Debate in the Senate has already begun and could go on for weeks.
This is because Monti is taking a different approach, not intending to force a package through, as was done with pensions.
Under pressure from the Democratic Party, one of the technocratic government’s main supporters, the original labour reform proposals have been slightly softened.
No government has ever crossed the red line of ‘article 18’.
This covers the severance conditions for workers in companies of more than 15 employees.
It forces companies to rehire a worker as well as paying compensation if a judge rules the sacking is unjustified.
Originally, the reform called for doing away with the rehiring requirement.
But, in its present form, a judge can still order the employee be rehired when the grounds given for firing him or her are proven to be “manifestly non-existent”.
To explain the positive points of the reform plan, Minister for Labour Elsa Fornero went to Calabria in southern Italy, where unemployment among young people is around 40 percent.
Fornero said: “This reform is well-balanced. It looks at many aspects of the labour market. It doesn’t only cover firing workers. Its provisions make it possible to obtain more stable work and it offers support to people who have lost their jobs.”
Fornero insists that the proposals are not already concluded, they are not untouchable. She was moved to tears when she announced the pension reforms last December and what they would mean to retired Italians.
Monti said: “She means ‘the sacrifices’, you understand.”
Divisions remain exposed by the pension upheaval. Italian unions say 350,000 people will be left without an income as a result.
The government says the figure is more like 65,000.
But there is no question that many tens of thousands agreed to be laid off in return for unemployment benefits before retirement, and those payments will now expire before they reach the new age introduced by those reforms.
Last Tuesday, the International Monetary Fund sounded the alarm over employment in Europe. The jobless rate in euro zone countries is projected to rise again this year, the worst record being in Spain, where unemployment could go over 24 percent. In Italy the expected figure is 9.5 percent.
This puts added pressure on the government in Italy, which is in the process of engaging in several weeks of debate on a new draft law for reform of the labour market.
Luigi Spinola, a political and economic analyst in Rome, spoke to euronews about the prospects.
Claudio Rosmino, euronews: Labour reform is the biggest, most dangerous challenge facing the Monti government. What are the key points, the most sensitive points?
Spinola: The labour market is divided in two. You’ve got your stable permanent fulltime contracts on one hand, which offer workers numerous guarantees but which are costly and therefore employers only offer a limited number of these.
And then there’s a parallel work sector with short term contracts, atypical contracts that pay very little and give very few guarantees.
Monti’s challenge is to find a kind of redistribution of rights, in two ways: make it easier to fire people, and make access to work more strict.
I’ll explain this second point, otherwise it might appear paradoxical. It’s really about making it more costly for employers to resort to those atypical, flexible contracts.
euronews: With strict rules on hiring and flexibility for firing, isn’t there a risk that things will get more precarious for workers, without really improving employment nationally?
Spinola: Yes, where firing flexibility is concerned, for instance. The judge at the labour court remains powerful and can therefore see to it that everything is done by the rules and the risks are limited.
We could, on the other hand, have an opposite effect because of this effort to force companies to replace short term contracts with permanent contracts.
Ideally, all this is great, but we’re going to have to see whether workers rather than getting successive short term contracts end up with even less.
euronews: Can reform like this really help Italy’s economy attract foreign capital investment, as Monti hopes it will?
Spinola: Monti is convinced of it. We saw that one month ago when he was in Tokyo and Beijing and was promoting this reform with his hosts.
However, analysts are more sceptical. They say that reform is a necessary prerequisite but isn’t enough in itself.
They’re thinking about other obstacles: the Italian bureaucracy, the complexity of the judicial system. Therefore, we mustn’t expect a lot from foreign investment.
euronews: Labour reform in Italy is quite complicated. People in the past who have sought to intervene by going after private interests had to water down their ambitions. We saw that with the recent law on liberalising certain professional activities. Is work in Italy as complicated as that?
Spinola: Monti made an important choice on this subject: he brought both workers and employers to the negotiating table but without giving them the right to vote.
Then you have to remember that we have a politically strange situation here: a government of technocrats supported by two parties that have been at the centre of a political battle for 15 years. So far there’s been a positive effect from this collaboration, and it could produce results.
Italy in throes of labour reform