US embassy cable - 03ROME579

UNCLAS SECTION 01 OF 02 ROME 000579 
 
SIPDIS 
 
DOL FOR ILAB/BRUMFIELD 
DEPARTMENT FOR DRL/IL AND EUR/WE 
 
E.O. 12958:  N/A 
TAGS: ELAB, PGOV, PGOV, IT, IT ELAB 
SUBJECT: PARLIAMENT PASSES AMBITIOUS LABOR MARKET REFORM 
 
 
                       UNCLASSIFIED 
 
PAGE 02        ROME  00579  01 OF 02  131309Z 
REF: ROME 294 
 
1. SUMMARY: PARLIAMENT LAST WEEK APPROVED A SWEEPING REFORM 
OF ITALY'S RIGID EMPLOYMENT RULES.  THE MEASURE IS ONE OF 
THE MAIN STRUCTURAL ECONOMIC REFORMS PROMISED BY THE 
BERLUSCONI GOVERNMENT AND THE FIRST TO BE APPROVED BY THE 
PARLIAMENT. THE NEW MEASURES ARE DESIGNED TO GIVE EMPLOYERS 
MORE FLEXIBILITY TO TAILOR THEIR WORKFORCE TO CHANGING 
NEEDS. THE GOVERNMENT BELIEVES THE REFORMS WILL HELP REDUCE 
UNEMPLOYMENT AND BOOST THE COMPANIES' GROWTH. EMPLOYERS ARE 
PREDICTABLY SATISFIED WITH THE REFORMS. TRADE UNIONS ARE 
SPLIT INTO TWO FACTIONS: CISL AND UIL SUPPORT THE MEASURES 
IN PRINCIPLE, THOUGH THEY WILL SEEK SOME ADJUSTMENTS VIA THE 
IMPLEMENTING REGULATIONS, WHILE CGIL, ITALY'S LARGEST AND 
MOST LEFT-LEANING CONFEDERATION, OPPOSES THEM. THE REFORMS 
SHOULD INCREASE THE EMPLOYMENT RATE OF YOUNG PEOPLE AND 
REDUCE THE NUMBER OF INFORMAL JOBS, BUT ADDITIONAL REFORMS 
WILL BE NEEDED TO IMPROVE THE OVERALL LABOR PICTURE. END 
SUMMARY. 
 
2. ON FEBRUARY 5, THE SENATE APPROVED THE BIAGI LAW, A 
SWEEPING REFORM OF RULES GOVERNING ITALY'S RIGID LABOR 
MARKETS. THE LAW, NAMED FOR THE LABOR MINISTRY ADVISOR 
ASSASSINATED LAST YEAR FOR ADVOCATING THE REFORMS, IS ONE OF 
THE MAIN STRUCTURAL REFORMS ANNOUNCED BY BERLUSCONI AND THE 
FIRST APPROVED. 
 
3. THE LAW INTRODUCES NEW KINDS OF FLEXIBLE LABOR CONTRACTS, 
INCLUDING: "JOB ON CALL" (UNDER WHICH THE EMPLOYER PAYS THE 
WORKER A RETAINER AND CAN EMPLOY HIM WHENEVER AS NEEDED); 
JOB SHARING; AND "STAFF LEASING" (ESSENTIALLY HIRING WORKERS 
                       UNCLASSIFIED 
 
PAGE 03        ROME  00579  01 OF 02  131309Z 
FROM AN EMPLOYMENT AGENCY). IT ALSO REDUCES BARRIERS TO PART- 
TIME HIRING IN ORDER TO ENCOURAGE EMPLOYMENT OF YOUNG PEOPLE 
AND WOMEN. COMPANIES WILL RECEIVE MORE FREEDOM TO 
"OUTSOURCE" ASPECTS OF THEIR BUSINESS AND WILL BE REQUIRED 
TO PROVIDE MORE TRAINING TO APPRENTICESHIP EMPLOYEES. THE 
LAW LIMITS THE USE OF FREE-LANCE CONTRACTS (CURRENTLY WIDELY 
USED BY COMPANIES TO EMPLOY ADDITIONAL STAFF WITHOUT 
ASSUMING THE LONG-TERM FINANCIAL LIABILITIES ASSOCIATED WITH 
FORMALLY HIRING NEW FULL-TIME WORKERS) AND ENCOURAGES 
EMPLOYERS INSTEAD TO USE SHORT-TERM CONTRACTS.  THE LAW ALSO 
PARTIALLY PRIVATIZES EMPLOYMENT AND OUTPLACEMENT SERVICES, 
WHICH WILL NOW BE PROVIDED NOT ONLY BY LARGELY INEFFECTIVE 
PUBLIC AGENCIES BUT ALSO BY PRIVATE AGENCIES, CONSULTANTS 
AND UNIVERSITIES TRYING TO REDUCE THE MISMATCH BETWEEN 
SUPPLY AND DEMAND OF EMPLOYMENT. 
 
4. PASSAGE OF THE MEASURE CAPS 18 MONTHS OF DEBATE AND 
DISPUTE OVER LABOR MARKET REFORMS.  IT BUILDS ON A REFORM 
PACKAGE PASSED IN 1997 BY THE THEN CENTER-LEFT D'ALEMA 
GOVERNMENT THAT PERMITTED FOR THE FIRST TIME SOME USE OF 
PART-TIME AND FREE-LANCE WORKERS.  BOTH PACKAGES ARE 
DESIGNED TO REDUCE UNEMPLOYMENT (WHICH VARIES REGIONALLY 
FROM 4% IN NORTHERN ITALY TO 20% IN SICILY AND OTHER PARTS 
OF SOUTHERN ITALY) AND THE "INFORMAL" (AND UNTAXED) 
EMPLOYMENT ARRANGEMENTS UNDER WHICH ALMOST 20% OF THE 
WORKFORCE  IS EMPLOYED.  IN OCTOBER 2001, LABOR MINISTER 
MARONI ISSUED A WHITE BOOK CONTAINING THE PROPOSED REFORMS. 
CONFINDUSTRIA, THE MAIN EMPLOYERS' ASSOCIATION, AGREED 
ALMOST COMPLETELY ON THE NEED FOR PROPOSED REFORMS, AND TWO 
OF THE THREE LARGEST LABOR CONFEDERATIONS, CISL AND UIL, 
AGREED TO DISCUSS THEM.  THE LARGEST LABOR CONFEDERATION, 
                       UNCLASSIFIED 
 
PAGE 04        ROME  00579  01 OF 02  131309Z 
CGIL, HOWEVER, DISAGREED ON THE CONCEPT OF THE PROPOSED 
REFORM AND OPPOSED IT. 
 
5. THE NEW LAW DOES NOT ADDRESS THE BERLUSCONI GOVERNMENT'S 
CONTROVERSIAL PROPOSALS TO GIVE EMPLOYERS MORE FLEXIBILITY 
TO FIRE WORKERS.  THAT PROPOSAL, WHICH IS PROCEEDING 
SEPARATELY THROUGH PARLIAMENT, PROVOKED THE HARSH REACTION 
OF ALL THREE CONFEDERATIONS LAST YEAR THAT CULMINATED IN A 
GENERAL STRIKE IN APRIL. AFTERWARD CISL AND UIL AGREED TO 
RESUME NEGOTIATION. THE PACT FOR ITALY, WHICH WAS SIGNED IN 
JULY BY EMPLOYERS, THE GOI AND MOST TRADE UNIONS (BUT NOT 
CGIL), PROVIDES FOR A LIMITED AND EXPERIMENTAL REFORM OF 
ARTICLE 18 AND INTRODUCES SOME FLEXIBILITY IN THE LABOR 
MARKET. ON FEBRUARY 18, PARLIAMENT WILL DEBATE ON THE BILL 
THAT WOULD REFORM ARTICLE 18. THAT TIMETABLE NO DOUBT WAS 
INFLUENCED (AS WAS THE APPROVAL OF THE BIAGI LAW) BY THE 
CONSTITUTIONAL COURT'S DECISION LAST MONTH TO A PERMIT A 
POPULAR REFERENDUM ON THE PROVISION (REFTEL).  PARLIAMENT 
WILL ALSO DISCUSS REFORMS TO UNEMPLOYMENT BENEFITS SCHEMES. 
 
6. ANTONIO D'AMATO, THE PRESIDENT OF CONFINDUSTRIA, CALLED 
THE BIAGI REFORM LAW "THE MOST RELEVANT IN THE LAST THIRTY 
YEARS" AND SAID HE EXPECTS IT TO GENERATE INCREASES IN 
EMPLOYMENT. CISL AND UIL CONSIDER IT POSITIVE BUT 
INEFFECTIVE WITHOUT NEW PRIVATE AND PUBLIC INVESTMENT IN 
INFRASTRUCTURE AND IN THE INDUSTRIAL SECTOR.  CGIL DISAGREES 
 
                       UNCLASSIFIED 
 
                           UNCLASSIFIED     PTQ2567 
 
PAGE 01        ROME  00579  02 OF 02  131309Z 
ACTION DRL-01 
 
INFO  LOG-00   NP-00    AID-00   CEA-01   CIAE-00  COME-00  CTME-00 
      DODE-00  ITCE-00  ANHR-00  SRPP-00  DS-00    EB-00    EXME-00 
      EUR-00   OIGO-00  E-00     UTED-00  VC-00    FRB-00   H-01 
      TEDE-00  INR-00   ITC-01   LAB-01   L-00     VCE-00   AC-01 
      NSAE-00  NSCE-00  OMB-01   OPIC-01  PA-00    PM-00    PRS-00 
      ACE-00   P-00     SCT-00   SP-00    IRM-00   SSO-00   STR-00 
      TEST-00  TRSE-00  USIE-00  R-00     PMB-00   DSCC-00  PRM-00 
      G-00     NFAT-00  SAS-00     /008W 
                  ------------------359E21  131309Z /38 
P 131222Z FEB 03 
FM AMEMBASSY ROME 
TO SECSTATE WASHDC PRIORITY 8210 
INFO DEPT OF LABOR WASHDC 
EU MEMBER STATES COLLECTIVE 
AMCONSUL MILAN 
AMCONSUL FLORENCE 
AMCONSUL NAPLES 
 
UNCLAS SECTION 02 OF 02 ROME 000579 
 
SIPDIS 
 
DOL FOR ILAB/BRUMFIELD 
DEPARTMENT FOR DRL/IL AND EUR/WE 
 
E.O. 12958:  N/A 
TAGS:  ELAB, PGOV, IT 
SUBJECT: PARLIAMENT PASSES AMBITIOUS LABOR MARKET REFORM 
 
                       UNCLASSIFIED 
 
PAGE 02        ROME  00579  02 OF 02  131309Z 
ON THE NEW LAW SINCE IT CREATES, IN CGIL'S TERMS, "UNSTABLE 
JOBS WITH LIMITED PROTECTION," REDUCES THE ROLE OF 
COLLECTIVE BARGAINING AND PROMOTES A ROLE OF TRADE UNIONS 
SIMILAR TO A SOCIAL SERVICE AGENCY INSTEAD OF RECOGNIZING 
THE REPRESENTATION OF THE WORKERS' INTERESTS. LABOR MINISTRY 
UNDERSECRETARY MAURIZIO SACCONI ANNOUNCED THAT THE GOI WAS 
READY TO RESUME DIALOGUE WITH SOCIAL PARTNERS, CGIL 
INCLUDED, ON THE IMPLEMENTING DECREES, STARTING WITH 
EMPLOYMENT SERVICES, STAFF LEASING AND OUTSOURCING. TIZIANO 
TREU, ONE OF THE LEADERS OF THE MODERATE CENTER LEFT PARTY, 
THE DAISY, AND FORMER LABOR MINISTRY, CONSIDERS USELESS THE 
MAIN PART OF THE LAW. 
 
7. THE BIAGI LAW'S PASSAGE IS NOT THE FINAL WORD ON LABOR 
REFORM.  THE GOI MUST NOW ISSUE IMPLEMENTING REGULATIONS (IN 
ACCORDANCE WITH THE PRINCIPLES OUTLINED IN THE LEGISLATION) 
TO DETAIL EXACTLY HOW THE NEW FORMS OF FLEXIBILITY, AND THE 
REVISION OF PART-TIME AND FREE LANCE CONTRACTS, WILL BE 
IMPLEMENTED, IN OBSERVANCE OF THE PRINCIPLES PROVIDED BY THE 
LAW ITSELF.  THE GOVERNMENT HAS TWELVE MONTHS TO COMPLETE 
THIS PROCESS AND HAS PLEDGED TO CONSULT CLOSELY WITH BOTH 
EMPLOYERS AND TRADE UNIONS IN DRAFTING THE RULES.  CLEARLY, 
THE CISL AND UIL HOPE TO USE THIS PROCESS TO ADDRESS SOME OF 
THEIR MISGIVINGS ABOUT THE BROAD PROPOSALS.  THE LABOR 
MINISTRY REPORTEDLY HAS ALREADY DRAFTED MANY OF THE 
IMPLEMENTING REGULATIONS AND HOPES TO HAVE THE BULK OF THEM 
IN PLACE BY THIS SUMMER. 
 
8. COMMENT ITALY'S HIGH LEVEL OF UNEMPLOYMENT (8.9 PERCENT), 
AND ITS LOW EMPLOYMENT RATE (AT 55 PERCENT, THE LOWEST IN 
EUROPE), DEMONSTRATE THE LACK OF INNOVATIONS AND INVESTMENTS 
                       UNCLASSIFIED 
 
PAGE 03        ROME  00579  02 OF 02  131309Z 
OF COMPANIES AND THE RIGIDITIES OF THE LABOR MARKET. 
BERLUSCONI'S CENTER-RIGHT GOVERNMENT WANTS TO ADDRESS BOTH 
ISSUES BY INTRODUCING NEW KINDS OF OPPORTUNITIES FOR WORKERS 
AND COMPANIES.  THE MEASURES APPROVED APPEAR CRUCIAL FOR 
REDUCING INFORMAL JOBS AND THE UNEMPLOYMENT OF YOUNG PEOPLE, 
WHICH WILL SUPPORT ECONOMIC GROWTH.  WE DON'T BELIEVE THEY 
WILL BE SUFFICIENT TO RAISE THE EMPLOYMENT RATE OF WOMEN AND 
TO INCREASE THE ACTIVITY RATE(THE NUMBER OF BOTH EMPLOYED 
AND UNEMPLOYED EXPRESSED AS PERCENTAGE OF THE TOTAL 
POPULATION).  THOSE CHALLENGES WILL REQUIRE A CHANGE IN THE 
WELFARE SERVICES DEVOTED TO FAMILIES IN ORDER TO PARTIALLY 
EXEMPT FROM PERSONAL CARE FUNCTIONS, AND EXTRA INVESTMENTS 
IN TRAINING AND COUNSELING. IN SOUTHERN ITALY THE LACK OF 
INVESTMENT AND INFRASTRUCTURE ARE THE MAIN WEAKNESSES, WHICH 
MUST BE ADDRESSED IN ORDER TO STIMULATE JOB CREATION. 
 
9. WE EXPECT CGIL AND THE COMMUNIST RENEWAL PARTY (RC) WILL 
CONTINUE TO STRONGLY OPPOSE THE BIAGI LAW'S REFORM MEASURES, 
INCLUDING VIA STRIKES AND POLITICAL INITIATIVES SUCH AS 
POPULAR REFERENDA.  IN DEFENDING THEIR TRADITIONAL CONCEPT 
OF THE LABOR MARKET, CGIL AND THE RC WILL FOCUS THEIR 
OBJECTIONS ON THE REFORM PACKAGE'S CREATION OF "UNSTABLE 
JOBS" INSTEAD OF LONG-TERM OR PERMANENT CONTRACTS. THE GOI 
WILL NEED TO MAKE EXTRA EFFORTS TO EXPLAIN TO PUBLIC OPINION 
THE NEW OPPORTUNITIES FOR UNEMPLOYED WORKERS AND TO POINT 
OUT THE CONSERVATIVE AND UNFRUITFUL APPROACH OF THE LEFT 
THAT OPPOSES THE REFORM OF LABOR MARKET AND PROPOSED THE 
REFERENDUM ON THE EXTENSION OF ARTICLE 18 TO BE HELD NEXT 
SPRING. END COMMENT 
 
SEMBLER 
                       UNCLASSIFIED 
 
PAGE 04        ROME  00579  02 OF 02  131309Z 
 
                       UNCLASSIFIED 
 
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 2003ROME00579 - Classification: UNCLASSIFIED