Italy’s prime minister wins labour reform confidence vote

Matteo Renzi (left) and François Hollande at the Milan summit on jobs and growth, 8 Oct. 2014 [Palazzo Chigi/Flickr]

Matteo Renzi (left) and François Hollande [Palazzo Chigi/Flickr]

Matteo Renzi won the most important parliamentary confidence vote of his eight-month-old government early on Thursday (8 October), on a labour reform proposal he hopes will boost his EU credentials.

Renzi won the vote in Italy’s Senate, 165-111. He would have had to step down if he had lost. The vote, expected in the afternoon, was delayed late into the night after a day of raucous stonewalling by opposition parties. The legislation now goes to the Chamber of Deputies for review.

The prime minister called the vote in order to cut short debate over his broad proposal to change labour laws that many economists say have stifled job creation and scared off foreign investors in a country whose economy has stagnated for two decades.

“We want to eliminate the poison that kills investment,” Labour Minister Giuliano Poletti said in a speech to the Senate, before the vote.

The government’s proposals are still very broad-brushed, however, and it remains to be seen how far Renzi’s proposed reforms will go.

For example, it is unclear how the government plans to change a measure that now makes it very difficult for companies with more than 15 employees to fire workers with open-ended contracts. Also, based on official comments thus far, none of the changes are expected to apply to Italy’s public sector.

Senators voted on a so-called “delegating law,” which gives the government power to work out the details of the reform over the coming months.

Government officials hope that success in the confidence vote will be seen by Italy’s EU partners as a blank cheque for Renzi in pushing his so-called “Jobs Act.”

Changes to labour laws will let Renzi show Italy’s partners that his reform agenda is advancing, and boost his EU credibility, at a time when Italy is backtracking on its debt-reduction pledges amid a dire economic downturn and record unemployment.

Renzi is preparing an expansionary 2015 budget in an attempt to stimulate the economy, and is hoping that the European Union can cut him some slack to bring down Italy’s massive public debt more slowly than the bloc’s fiscal rules dictate.

The chances of such leeway being granted will increase if the European Commission, Germany and other northern European countries are persuaded that Italy is finally carrying out structural reforms that can improve its growth potential.

Sacred cow

The centre-left government of the 39-year-old former mayor of Florence enjoys only a slim majority in the Senate. Renzi went into the vote saying he did not fear dissent within his own Democratic Party (PD), which he took over less than a year ago, but some senators in the PD were very critical of the measure.

One PD senator, Walter Tocci, said he would vote for the government, but then resign his seat in parliament in protest against the reform that he said could erode workers’ rights and risked betraying the hopes of Italy’s unemployed youth.

Unemployment in the eurozone’s third-largest economy is running above 12 percent, and for Italians under the age of 25, it is at an all-time high of 44 percent. Young people lucky enough to find work are invariably hired on temporary contracts, with no employment rights or job protection.

Renzi has made it clear that any new law that is enacted must change Article 18 of the Labour Statute, which makes it difficult for companies to fire workers on indefinite contracts.

Evidence shows that most workers prefer to negotiate a severance payment, and that the number of fired employees who return to their posts after a judge rules in their favour is limited. Still, companies say the possibility of being forced to take back staff adds a level of uncertainty that makes it difficult to invest in Italy.

Renzi faces resistance from labour unions over any significant change to Article 18. One union, the leftist CGIL, has threatened a national strike if the government tries to change the law.

On Wednesday afternoon, Renzi hosted a conference of EU leaders, Milan which he called to discuss ways of stimulating growth and job creation across Europe.

At the meeting, France and Italy pressed for an easing of budget restrictions to favour economic and jobs growth, but won no concessions from German Chancellor Angela Merkel, who insisted countries had to move faster on reforms.

Matteo Renzi, the Italian prime minister, has staked much of his political credibility on his so-called Jobs Act.

The labour reform includes plans to ease restrictions on firing workers, cut the number of short-term contracts, boost the role of employment agencies and extend jobless benefits.

The Job Act has faced resistance from trade unions and a minority of Renzi's own Democratic Party (PD) lawmakers who protest against plans to reduce job protection for workers in large firms.

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