Italy's Renzi treads carefully over labour reform

-A +A

The new leader of Italy's Democratic Party trod a careful line on labour reform on Wednesday (18 December), pledging to overhaul laws blamed for deterring new hiring while avoiding a direct challenge to job protection rules backed by the left's union allies.

Matteo Renzi's election this month as head of the centre-left Democratic Party (PD), the largest party in Prime Minister Enrico Letta's coalition government, has added a new dimension to moves to overhaul Italy's stagnant economy. But many of the details of what he wants to achieve remain vague.

Speaking at a book presentation, Renzi pledged to simplify the complex web of rules governing employment contracts. But he declined to say what he would do about Article 18, the highly symbolic section of the labour code that protects workers on full contracts against unjustified dismissal.

"We will present our complete proposals on labour reform in January. If we get into an ideological contest about Article 18, we won't get anywhere," he said.

Youth unemployment

With a youth unemployment rate of more than 40% and many of those who do have jobs condemned to temporary contracts with no security, an overhaul of employment laws is a top priority for Letta's government as it struggles to pull Italy out of a two-year recession.

However, all sides are keenly aware of the problems which hit the technocrat government of former Prime Minister Mario Monti when it attempted to loosen job protection guarantees blamed for putting firms off giving full contracts to young workers.

The battle with unions over the job guarantees in Article 18 of the labour statute became one of the defining episodes of Monti's government and contributed significantly to its sharp fall in popularity in 2012.

In Italy's notorious "dual track" labour system, workers on full contracts enjoy extensive rights in contrast to the army of others on temporary or part-time contracts with little protection.

Instead of encouraging employers to take on new workers, the reforms introduced under the Monti government have been widely condemned for exposing firms to potentially lengthy legal battles in which workers laid off can force their employers to take them back.

Regarded with suspicion by many on the left, the 38-year-old Renzi has repeatedly promised to break with the old party leadership. But he has appeared reluctant to get into a damaging battle with the PD's traditional union allies straight away.

Flexicurity model

A team is currently working on details of a "Job Act" that Renzi wants to include in a formal coalition pact with the centre-right partners in Letta's government. The act is expected to include a simpler contract for new hires with less stringent guarantees but more unemployment benefits.

"We are proposing the Scandinavian 'flexicurity' model," Davide Faraone, the PD's new welfare specialist, told Reuters. "The idea is that every degree of rigidity that is cut is balanced by a corresponding increase in social protection."

He said the debate around Article 18, a banner issue for unions and the left, was largely irrelevant to the modern economy in which most new jobs were on the basis of temporary or part-time contracts.

"Article 18 is not a central part of the labour market today. Talking about Article 18 is talking about a labour system that doesn't exist anymore," he said.