Italian March Business Confidence Rises After Labor Reform

Italian business confidence in March rose from the lowest level in more than two years after the government adopted measures to overhaul the labor market and make it easier for companies to shed workers during economic downturns.

The manufacturing-sentiment index rose to 92.1 from a revised 91.7 in February, Rome-based national statistics institute Istat said today. Economists had predicted a reading of 91.5, according to the median of 15 estimates in a Bloomberg News survey.

Prime Minister Mario Monti’s government passed its labor market reform this month, defying union opposition in easing firing rules as part of his economic overhaul began in December. The government is implementing 20 billion euros ($27 billion) of austerity measures aimed at balancing the budget next year and has also passed laws to open up closed professions and ease bureaucracy.

Europe’s fourth-biggest economy slipped into recession in the first quarter and the European Commission forecasts that Italy will contract 1.3 percent this year. Consumer demand is being hurt by the tax increases and higher gasoline prices caused by the austerity plan and the government may boost value added tax another 2 percentage points later this year.

Prime Minister Mario Monti today said today that the region’s debt crisis is “almost over,” paving the way for an economic recovery.

Istat originally reported a February confidence reading of 91.5.

To contact the reporter on this story: Chiara Vasarri in Rome at cvasarri@bloomberg.net

To contact the editor responsible for this story: Jerrold Colten at jcolten@bloomberg.net

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