Italian Parliament Passes Monti’s Labor Law Ahead of EU Summit

The Italian parliament gave final approval to Prime Minister Mario Monti’s labor-market overhaul that makes it easier to hire and fire workers, allowing the premier to make the case at a European Union summit that his revamp of the Italian economy is on track.

Lawmakers in the lower house of Parliament, or Chamber of Deputies, in Rome voted today 393 to 74 in favor of the bill. Before the final vote, Monti carried four confidence motions on the law by a margin of more than 300 votes. The Senate passed the reform on May 31.

The overhaul aims to boost hiring amid Italy’s fourth recession since 2001. Joblessness has climbed to the highest in more than a decade. The legislation introduces a new system of unemployment benefits that expand coverage to a broader pool of workers than under current rules.

Monti had pushed lawmakers to approve the plan before the start of a two-day summit tomorrow in Brussels, where European leaders will trying to engineer a plan to contain the spread of the euro region’s debt crisis. Monti has proposed that leaders agree to allow the bailout funds more flexibility to help bring down borrowing costs in countries that are sticking to fiscal goals and economic reforms such as Italy.

Firing Rules

The plan gives companies facing economic difficulties more flexibility in firing workers.

The conditions for dismissals were the most contentious in the government’s negotiations with unions and employers earlier this year and in Parliament after the government passed the revamp on April 4.

Monti had initially proposed changing Article 18 of the labor law, which allows judges to order the reinstatement of a worker fired for economic reasons if the court ruled the employee was unfairly dismissed. Under pressure from unions and the Democratic Party, which backs the government, Monti agreed to water down the change and the current version still allows for reinstatement if the motives for dismissal are deemed groundless.

Employers say the threat of reinstatement has a chilling effect on firing even when companies are in trouble, while unions say that without the protection, companies would be able to use the excuse of economic hardship to freely fire workers.

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