The Labours of Monti

Prime Minister Mario Monti has set himself three major tasks so far. The first was the austerity budget, which he called Salvitalia or “Save Italy”, passed in November and now beginning to bite. The second was the Crescitalia or “Grow Italy” drafted in January and now before Parliament. The third, with no easy nametag, is labour reform. After a couple of months of discussions between the Minister of Labour, Elsa Fornero and unions and employers, a bill is about to go to Parliament.

Fornero, Monti and the other high profile minister, Corrado Passera (pictured) have been swapping roles since they took the jobs, with one or other of them playing tough or mediating. Over the weekend, it was Fornero who said that if the labour reform is not accepted (by the majority in Parliament), then, the government will go home. This has been Monti’s subtext since he became prime minister; he acknowledges that his government has no electoral legitimacy and can be brought down by Parliament in any division. But he and they know full well that the parties cannot take the responsibility of bringing down a government which is keeping Italy afloat in the euro storm.

The red rag (to both unions and employers and to their supporters in Parliament) is article 18 of the 1970 Worker’s Statute. This allows a worker who has been unfairly dismissed (as established by a court) to be reinstated. It only applies to firms with more than 15 employees and in practice only applies to employees who have an indefinite contract.

The secretary of the employers’ federation Confindustria, Emma Marcegaglia recently accused the Monti government of giving in to union and PD pressure over article 18. The centre-right PdL has moved in to back up the Confindustria in the parliamentary debate. Marcegaglia and others have maintained that article 18 is a fundamental brake on growth, not because it is used in practice but because it dissuades foreign investment. Granted it is difficult to prove a negative but all Confindustria people can come up with are very vague “colleagues have told me…”. Last month British Gas formally gave up on a project to build a regasification plant in Brindisi. They had spent 11 years and €250m on the project but even then had not been able to complete the paperwork for the necessary authorisations.

Only today, the emir of Qatar told Monti that the most important reason for not investing in Italy was corruption. Monti added that the uncertainty and desperate slowness of reaching a verdict in civil law was another reason.

Over the medium term, Italy’s position in the Heritage Foundation’s ratings on “Economic Freedom” have continued to fall with Italy now coming in (in 2012) at an abysmal 92nd (out of 179) place. According to the conservative thinktank, almost all their criteria have worsened (freedom from corruption, labour and monetary freedom, trade freedom, fiscal freedom). Italy is in the class of “mostly unfree” countries, between Azerbaijan and Honduras. Heritage is partnered by the Wall Street Journal which recently also accused the Monti government of giving in to the unions over article 18 but they have condemned Italy for the last decade for its lack of economic liberalism – left, right and Monti governments.

These seem to me to be much more convincing reasons for not investing in Italy than the distant possibility that if an employee is laid off and a court finds that the dismissal was without “just cause”, the employee will have the choice of getting the job back instead of monetary compensation.

The unions too have made the defence of article 18 into an article of faith with the more left wing CGIL threatening a general strike if it is abolished. The Democratic Party is preparing to move into parliamentary trenches though neither they nor the PdL are prepared to fight too violently because they cannot afford to bring down the government.

Hence the grandstanding from Fornero followed by rude rejections from the party leaders and then conciliatory moves by Passera and then Monti.

The parties are concerned with their own credibility (and that will be the next blog) while government and civil society organisations including employers and unions are trying to deal with the domestic and foreign pressure.

At home there is a new nightmare word, esodati, a neologism meaning literally “exodused”, in practice a class in limbo. These are people who were paid by the cassa integrazione, a temporary redundancy fund, on the understanding that their pay would come first from the cassa and then they would retire and get a pension. With Monti’s November reform, the retirement age has moved and these people find themselves without the cassa and without a pension; far from being led by Moses, they are stuck halfway across the Red Sea with the waters about to cover them. The problem is that we have no idea how many they are. The government says 65,000 and says they can take early retirement. INPS, the national pension fund says double that and that the pensions are not covered. The unions reckon the figure is closer to 300,000.

Youth unemployment continues to grow. ISTAT says that unemployment is up 0.2% in February on January at 9.3% and is the highest figure since 2004 when this series began. Youth (15-24) unemployment is 31.9%. Women suffer more. The eurozone is 10.8% so Italy is still slightly better off.

On the other side, a reliable research institute reckons that in 2011, a record 11,600 businesses closed, the worst year since the crisis began. The figures are given flesh by the increasing number of suicides of bankrupt businessmen.
Meanwhile, internationally, the spread between German and Italian bonds wobbles more upwards than down and some of Monti’s previous supporters are less vocal.

This afternoon I got an invitation to express my “views on Italy's political situation and how it can ride the wave of financial problems”. It was consoling that the question was “how” and not “if” which is the way many consider it. It is still “how” and not “if” but Monti’s tasks and difficulties are increasing rather than decreasing.