September 17, 2014 / 2:03 PM / 5 years ago

Italy PM Renzi begins parliament drive for labour reform

ROME (Reuters) - Prime Minister Matteo Renzi’s promised overhaul of Italian labour law began to take shape on Wednesday with proposals for more flexible job protection rules to encourage companies to take on more workers.

Italy's Prime Minister Matteo Renzi gestures during a news conference at Chigi palace in Rome September 1, 2014. REUTERS/ Max Rossi

In an amendment tabled in the Senate, the government proposed a sliding scale of job security that would allow employers to lay off new hires relatively easily, but would increase guarantees the longer a worker remained in a job.

Renzi, who took office in February, has come under growing pressure from Italy’s European Union partners to show concrete progress with his ambitious reform agenda after perceptions that his government has failed to match its rhetoric with action.

The measure makes no direct reference to the much-disputed Article 18 of the labour code, which protects workers in larger companies from unfair dismissal and gives them a right to compensation when they lose their jobs for business reasons.

The provision is seen by unions and many on the left as a marker for wider worker rights and by employers and some on the centre-right as symbolic of the inefficiencies of the wider labour market.

The amendment is the first stage in a potentially lengthy parliamentary process that could drive a wedge between Renzi and leftist members of his centre-left Democratic Party as well as with Italy’s unions.

A first vote in the chamber is likely in early October but the measures would not take effect before the first half of 2015.

The government wants to simplify the labour code, replacing the more than 40 different contract types with a simpler system based around one or two basic contracts.

One of its main aims is to eliminate the so-called “dual labour market” which separates workers in heavily protected full-time jobs from the growing number on temporary contracts with few rights.

The system has a particularly severe impact on younger workers, already struggling to find work in an economy with a youth unemployment rate of about 43 percent.

“The idea is to have a single form of contract, perhaps two, and to link pay to productivity along with reforms to welfare protection,” Economy Minister Pier Carlo Padoan told RAI state television. He added that overhauling the system would render the issue of Article 18 “a non-problem”.

In a speech to parliament on Tuesday, Renzi pledged to move forward with labour market reforms, if necessary by pushing through an emergency decree if parliament dragged its feet and delayed legislation.

He has led calls for a more expansive interpretation of EU budget rules to ease an economic crisis that has left Italy in its third recession in six years, but he faces demands for proof that his government can succeed in passing structural reforms.

Although the actual impact of Article 18 is disputed by many economists, who say that no more than a few thousand workers make use of its conditions every year, it is widely seen as a deterrent for foreign investors into Italy.

“Translated in terms of perceptions from outside Italy, it’s an element which suggests that hiring or moving a person is more difficult in Italy than it is abroad,” Padoan said.

Writing by James Mackenzie; Editing by Robin Pomeroy

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