Italian Labor-Market Reform Passes First Hurdle in Senate

Prime Minister Mario Monti’s government won Senate approval of a labor-market overhaul that includes new rules for hiring and firing workers aimed at boosting growth amid Italy’s fourth recession in a decade.

The upper house of Parliament voted 231 to 33 in Rome today to approve the legislation, which now passes to the Chamber of Deputies for final approval.

Italy’s unemployment rate in March reached 9.8 percent, the highest since 2000. The labor package includes rules that favor hiring young people and women and give companies more flexibility in firing workers in a bid to jumpstart the economy, which has contracted for three straight quarters.

The rules on dismissals were the most debated in the government’s negotiations with unions earlier this year and in Parliament after the Cabinet passed the reform on April 4. While courts will keep the power to reinstate workers fired for reasons such as race or religion, employees let go for economic reasons may get their jobs back if the motives for dismissal are deemed groundless.

CGIL, Italy’s main union, has said it will hold a general strike against the new legislation.

Labor Minister Elsa Fornero has said that the new firing rules should also apply to civil servants. “We can’t have differences” in the treatment of private and public workers, she told reports in Turin on May 24.

The legislation approved today introduces a new system of unemployment benefits aimed at ensuring a comprehensive safety net for a broader pool of workers than under current rules. A new “Employment Insurance” fund, or ASPI, to be financed with contributions from the state and companies, will be gradually introduced starting from next year.

To contact the reporter on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net

To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net.

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