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Italy labour reform fails to enthuse experts

Government and union have fought tooth and nail over the country's new labour bill, but some economists say it's nothing more than a public image move aimed at foreign investors

AFP, Saturday 24 Mar 2012
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Views: 654

Mario Monti's labour reform, approved by Italy's cabinet after weeks of bitter talks, has been hailed as a key measure in galvanising the country, but some economic observers remain unconvinced.

The government had to fight tooth and nail with the Italian General Confederation of Labour (CGIL) over the bill.
But while Monti insisted it was crucial to boosting stagnant growth, some commentators have played down its significance.
"Rather than being revolutionary, this reform seems above all to be a public image operation aimed at foreign investors," Maurizio Del Conte, a labour rights expert at Milan's Bocconi university, told AFP.
"The pension reform, which passed almost unnoticed, was much more incisive," he said.
"The labour one, on the other hand, does not address the issue of imbalances between workers' rights and the need for companies to be flexible."
Economist Tito Boeri also expressed reservations.
"The reform doesn't resolve the problem of the dual nature of the labour market, where workers either have solid, protected permanent contracts or have one of the many precarious contracts," he said.
Labour rights expert Senator Pietro Ichino was more sympathetic, in comments to the Corriere della Sera daily.
"It's not a perfect reform, but it goes in the right direction," he said.
"It aligns our system of rights in the workplace with those of our main European partners."
The heated dispute between the government and unions has focused mainly on article 18 of the labour code.
Monti wants to change it to make it easier for companies to cut jobs for economic reasons, despite objections it will raise unemployment.
The CGIL union called a strike in protest, but economic watchers weary of the unfolding drama argue that the country's growth plans are hardly affected by article 18, which is evoked in just 0.5 per cent of dismissal cases.
"The country's economic growth is not linked to this article," said Del Conte.
"The government wanted to tackle exploitation and precarious jobs, but it will be difficult to apply the measures to our system.
"There are a myriad of small and medium enterprises which are impossible to control and black market labour is widespread," he added.
Nicola Salerno from CERM research group said the article 18 reform "may help change the mindset of a rigid and unmeritocratic system."
But, he added, "it is not the key factor which will change the labour market dynamic or its productivity."
"Article 18 has taken on a symbolic value, and it would have been wiser not to bring political and ideological issues into the crisis," she said.
After the economic troubles sweeping the eurozone hit Italy, Italians were forced to accept three austerity packages in quick succession.
The country slid into a recession and experts have forecast little to no growth this year.
With their new rules making it easier for companies to cut jobs for economic reasons, the government risks ending up with "numerous unemployed people, and few of the resources necessary to pay their remuneration," Salerno said.
As part of the reform, it will cost more for businesses to give short-term contracts to workers, which many believe will discourage them from hiring.
While the CGIL tried to get Monti to water down the reform, the employers association urged him to toughen it up or risk scaring off investors only just regaining confidence in debt-ridden Italy.
The government refused to contemplate a step backwards on the package and it will go to parliament after ministers have fine-tuned the details.
Some say the decision to side-step the country's largest union has shaken up the system.
"The fact that the government decided to go ahead, without giving the unions the opportunity to veto, is an important signal," said Boeri.
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