Italy's Chamber of Deputies approved modest labour reforms yesterday, following a difficult passage through Parliament, underlining the challenges facing Prime Minister Matteo Renzi in his pledge to overhaul the economy, reports Reuters.

The changes make it easier for firms to use temporary workers, reversing attempts by former Prime Minister Mario Monti to reduce the "duality" of a labour market divided between highly protected permanent workers and a growing army of temporary staff with virtually no rights or benefits.

The legislation, which was presented in March and has been the subject of persistent bickering and amendments by Mr Renzi's broad left-right coalition, finally passed by 279 votes to 143.

Mr Renzi had to resort to three votes of confidence to push it through parliament as a way of truncating debate and preventing further amendments.

He has pledged a much broader reform of the labour market in future months or years but has chosen an extremely slow parliamentary procedure, meaning it is unlikely to be approved before 2016 at the earliest.

Despite calls by the European Commission and other international bodies, Italy has struggled for years to substantially change its rigid labour rules which are partly blamed for unemployment of almost 13% and more than 40% among those below the age of 25.

Tito Boeri, a labour market expert and economist, said Mr Renzi's labour decree was "a step backwards" because it increased the "duality" of the labour market and made no attempt to make permanent contracts more flexible.

"Monti failed to adequately reform permanent contracts but at least he tried, whereas this reform just gives up on that goal and that is very bad for a government that is supposed to be strong and determined," Mr Boeri said.

The decree makes it possible for firms to renew temporary contracts five times for up to three years without any pause between one contract and the next and without giving any reason for recourse to a temporary rather than a permanent contract.

Previously employers could not simply "roll over" temporary contracts and had to give a reason each time a new one was signed.

It also removes an obligation for firms to have at least 80% of permanent workers, so long as they pay a fine for each temporary worker exceeding the 20% ceiling, and it makes it easier for them to keep apprentices on their books without giving them jobs.

The decree only affects temporary contracts and makes no changes to wage bargaining, unemployment benefits or hiring and firing rules for workers on permanent contracts who still make up the vast majority of the labour force.

The modest nature of the labour decree, its difficult passage through parliament and Mr Renzi's decision to put off the more substantial overhaul of the labour market that he had promised do not augur well for his broader reform plans.

The need for reform was underscored yesterday when data showed the economy contracted in the first quarter, disappointing hopes of a strengthening recovery after a two-year-long recession.

In February, when the 39 year-old former mayor of Florence ousted party rival Enrico Letta to become Prime Minister, he promised to "revolutionise" Italy with a major reform each month.

However, while there has been no let-up in Mr Renzi's energy or enthusiasm, he has had to come to terms with the difficulties of leading a fractious coalition which includes resistance from much of his own Democratic Party (PD).

The labour reform, scheduled for March, was far less ambitious than expected and presented as a kind of appetizer for a much broader "Jobs Act" that is eventually supposed to comprehensively overhaul regulation of the labour market.

Mr Renzi says the Jobs Act will reform legislation covering permanent contracts and change the structure of unemployment benefits.

However, the legislative vehicle chosen, by which parliament delegates powers to the government to draft measures, which must then return to parliament for approval, is notoriously slow and often never completed.