Italy's Renzi faces confidence vote over labour reform

[ROME] Italian Prime Minister Matteo Renzi faces the most important parliamentary confidence vote of his eight-month-old government, asking coalition partners to endorse labour reforms in a move he hopes will boost his European Union credentials.

The vote, which Renzi was expected to win, was delayed by several hours on Wednesday and will probably be held after midnight because debate was slowed by skirmishes with opposition lawmakers.

Renzi would have to step down if he lost. If passed, the legislation then moves onto the lower house Chamber of Deputies. "We've waited 20, 30 years (for the labour reform) and my senators have no problem waiting a few more hours to bring home the result," Renzi said after an EU jobs conference in Milan.

He 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 earlier in the day.

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

In particular, 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 bloated public sector.

In Wednesday's confidence vote, lawmakers will vote on a so-called "delegating law" giving the government the power to work out the details over the coming months and through subsequent parliamentary votes on specific measures.

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 the EU 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 dismal growth potential.

The centre-left government of the 39-year-old former mayor of Florence enjoys only a slim majority in the Senate. But Renzi said he did not fear negative surprises in the vote despite dissent within his own Democratic Party (PD).

Renzi has made clear that any eventual law 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.

However, Renzi faces resistance from hard-line labour unions over any significant change to Article 18, the sacred cow of Italian labour law that successive Italian governments have failed to tackle. One union, the leftist CGIL, has threatened a national strike if the government tries to change the law.

Renzi on Wednesday hosted a meeting of EU leaders in Milan which he called to discuss ways of stimulating growth and job creation across Europe.

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