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Italy – Parliamentary approval of overhaul of labour market expected by year-end

02 September 2014

Italian Prime Minister Matteo Renzi, facing rising unemployment and an economy that has slipped into its third recession since 2008, yesterday said that he expects parliamentary approval of an overhaul of the country's labour market by the end of the year, reports businessspectator.com.au

"We hope the [labour-market reform] bill will have parliamentary approval as soon as possible, surely by the end of the year," Mr Renzi said as he presented the official government website to show the pace of his ambitious program in the next 1,000 days. 

In August, the six-month old government was hit by a series of economic setbacks, such as a third recession in six years, a one-year low in business confidence, and an unemployment rate climbing to just shy of an all-time high. 

Mr Renzi said Italy must model its labour market on Europe’s largest economy, Germany, and that the country's competitiveness doesn't lie in cutting wages: "At the end of the 1,000 days, Italy will be a country with simple rules that will make it simple to invest in.” 

The government measures to overhaul Italy's institutions -- such as parliament, its electoral law and judicial system, and economy -- are being carried out because they are necessary for the country and not because it was being forced by external bodies to do so, such as the European Central Bank, he added. 

In May, Italy’s Chamber of Deputies approved modest labour reforms. The changes made it easier for firms to use temporary workers, reversing attempts by the previous government to reduce the duality of the labour market.

The legislation is part of a drive to simplify the country’s myriad of work contracts and benefits to encourage firms to take on workers, especially young ones. In August, however, Italy’s largest trade union, the Italian General Confederation of Labour (CGIL) announced that it was challenging the reforms passed by the government.

CGIL advised that it has petitioned the European Commission to take action, as the reforms allegedly break European law by encouraging firms to hire staff on temporary contracts, rather than permanent ones.

In light of the continuing economic difficulties Italy is facing, the backlash against even modest labour reforms does not bode well for Mr Renzi’s reforms.