Monti Says Italy to Ease Firing Rules Without Union Deal

Prime Minister Mario Monti
Prime Minister Mario Monti said that firing rules will be revised to distinguish between workers let go without just cause and those who lose their job for disciplinary or economic reasons. Photographer: Alessia Pierdomenico/Bloomberg

Prime Minister Mario Monti pledged to implement plans to ease firing rules after talks failed to produce an agreement on revamping Italy’s labor laws, prompting the nation’s biggest union to announce a general strike.

The CGIL, the only union to oppose the deal, announced today an 8-hour general strike to protest the changes, saying the date will depend on Parliament’s vote on the bill, according to an e-mailed statement. The union headed by Susanna Camusso, who will hold a press conference at 6 p.m. in Rome, will also stage eight hours of strikes at individual companies.

“There won’t be any signed agreement,” Monti said at a press conference last night in Rome after leading the final round of talks following two months of meetings with social partners. “These negotiations were purely consultative,” he said, adding that he wants to resolve the issue by next week.

Monti, who took over as premier from Silvio Berlusconi in November, pledged to expand jobless benefits, reduce temporary work contracts and allow more leeway in firing. The package marks his fourth major legislative effort since coming to power in November. He passed a 20 billion-euro ($26.5 billion) austerity plan to balance the budget and revamp pensions, followed by measures to boost competition and cut red tape.

‘High Standard’

“This agreement sets a high standard, as it would help to make significant progress towards a more modern and flexible labor market, and therefore encourage new hiring,” Fabio Fois, a European economist at Barclays Capital in London wrote in a note to investors. “The current legal framework has led to a two-tier labor market, with some workers overly protected with open-ended contracts and another group of workers with fixed-term contracts who lack job security.”

The yield on Italy’s 10-year bond was little changed at 4.91 percent at 1:09 p.m. Rome time. The benchmark FTSE MIB Index fell 0.7 percent.

Companies should now “double” their efforts to boost “investments, growth and employment” because they will no longer have the “excuse” of a rigid labor market, Monti said. The premier said the changes would also help convince foreign companies to expand in Italy.

With Monti forging ahead, the focus will now shift to getting the plan through parliament, where he will likely need the support of the Democratic Party, which is close to the CGIL. Monti has said he wants the bill passed by the end of the month.

Rules ‘Gutted’

“Timing is fundamental,” Labor Minister Elsa Fornero said last night. Dragging out the process would damage the credibility of the effort, she said, declining to rule out the Cabinet passing the legislation as a decree, so it would take effect before parliamentary passage.

Stefano Fassina, head of economic policy for the Democratic Party, said in an interview with newspaper La Repubblica that Article 18 had been “gutted.” The party would try to get the plan changed before it goes to parliament and propose amendments in the legislature if necessary, he said.

“The question now is whether there will be any dilution in the labor law legislation to assure passage,” said Richard McGuire, senior fixed-income strategist at Rabobank International in London, said.


Fornero said even under the new plan, dismissals without just cause would still be illegal and companies would still risk having to reinstate workers. Judges will also be able to order reinstatement if they rule that a company unjustly claimed they were firing staff for disciplinary reasons. The new rules would allow companies to fire for economic reasons without risk of reinstatement and workers would be entitled to as much as 27 months of compensation pay.

The package seeks to make the open-ended job contract the cornerstone of Italy’s labor market, Fornero said. The government wants to reduce structural unemployment and encourage the hiring of young people and women through apprentice contracts that lead to open-ended agreements, she said. Italy’s unemployment rate tops 9.2 percent, the highest since 2001.

The plan would also expand the system of unemployment benefits, which currently favor workers at the largest companies who already enjoy the most job security. Fornero said that the plan will cost an additional 1.8 billion euros. Workers will be eligible for 12 months of benefits, with anyone over 54 qualifying for 18 months.

Monti’s steps to shore up public finances and spur Italy’s economic growth, which has lagged behind the euro-region average for more than a decade, has helped restore confidence in the nation and bring down record borrowing costs. Italian 10-year bonds yield 4.9 percent, down from 7 percent when he took over.

Fiat SpA would not have “easily” implemented a plan to keep production at its Mirafiori plant in Turin if it weren’t for the policies of Monti’s government, Chief Executive Officer Sergio Marchionne said today. “The investment in Mirafiori would not have gone ahead very easily” without Monti as premier, he said in Bruges, Belgium.

-- With assistance from Flavia Rotondi in Rome. Editors: Jeffrey Donovan, Jeffrey Donovan

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