US embassy cable - 03ROME2177

UNCLAS SECTION 01 OF 02 ROME 002177 
 
SIPDIS 
 
DOL FOR ILAB/BRUMFIELD 
DEPARTMENT FOR DRL/IL AND EUR/WE 
 
E.O. 12958:  N/A 
TAGS: ELAB, ECON, ECON, IT, IT ELAB 
SUBJECT: METALWORKERS' PACT MAY SPUR BROADER LABOR 
FLEXIBILITY 
                       UNCLASSIFIED 
 
 
PAGE 02        ROME  02177  01 OF 02  161244Z 
 
REF: ROME 1889 
 
1. SUMMARY:  A NEW SECTORAL LABOR CONTRACT FOR ITALY'S 
METALWORKERS HAMMERED OUT MAY 8 HAS REVERBERATED ACROSS THE 
BUSINESS AND LABOR LANDSCAPE.  BOTH ITS CONTENT AND 
NEGOTIATION ARE IMPORTANT STEPS FORWARD IN MODERNIZING 
TRADITIONAL PRACTICES AND POLICIES THAT HAVE LONG BEDEVILED 
THE ITALIAN ECONOMY.  LABOR'S SPLIT OVER THE PACT HAS 
RENEWED CALLS BY THE SECTOR'S LARGEST, MOST MILITANT 
FEDERATION FOR LEGISLATION REQUIRING VERIFICATION OF UNIONS' 
ACTUAL REPRESENTATION WITHIN A SECTOR.  AT A MINIMUM, THE 
PACT OFFERS AT LEAST ONE INDUSTRIAL SECTOR THE PROSPECT OF 
RELAXING THE RIGID NATIONAL CONTRACTS THAT HAVE STIFLED WAGE 
FLEXIBILITY AND LIMITED PRODUCTIVITY GAINS, TWO FREQUENT 
DRAGS ON ITALIAN COMPETITIVENESS.  MOREOVER, ITS INNOVATIVE 
PROVISIONS MAY CARRY OVER AS PRECEDENTS INTO RENEGOTIATION 
THIS SUMMER OF ITALY'S GLOBAL PACT GOVERNING COLLECTIVE 
BARGAINING AGREEMENTS, A PROSPECT THAT HAS THE THREE MAIN 
LABOR CONFEDERATIONS WRESTLING OVER THE SHAPE OF THEIR 
FUTURE RELATIONSHIP WITH MANAGEMENT. 
 
2. FEDERMECCANICA, THE METAL MANUFACTURERS' ASSOCIATION, 
SIGNED A NEW SECTORAL CONTRACT WITH TWO OF ITALY'S THREE 
PRINCIPAL METALWORKER FEDERATIONS MAY 8.  THE NEW CONTRACT 
HAS BEEN HAILED AS AN INNOVATIVE DEPARTURE FROM PAST 
SECTORAL AGREEMENTS.  THE SPECIFICS SUPPORT THAT ASSESSMENT, 
IN THAT THE CONTRACT: 
 
- REPLACES RIGID WAGE INDEXATION TO GOVERNMENT INFLATION 
PROJECTIONS WITH A SET OF PRE-NEGOTIATED ADJUSTMENTS DERIVED 
                       UNCLASSIFIED 
 
PAGE 03        ROME  02177  01 OF 02  161244Z 
FROM CURRENT INFLATION ESTIMATES; 
- CREATES A NEW LABOR-MANAGEMENT COUNCIL TO MANAGE TRAINING 
AND OTHER LABOR SERVICES WITHIN THE SECTOR; 
 
- AUTHORIZES OVERHAUL OF A 30-YEAR POSITION CLASSIFICATION 
SYSTEM, WITH THE IDEA OF ELIMINATING A RIGID 7-TIER 
STRUCTURE IN FAVOR OF MORE FLEXIBLE SYSTEM OF PAY 'BANDS." 
 
THE CONTRACT ALSO INCLUDES PROVISIONS THAT WILL PERMIT 
LOCAL/REGIONAL BONUSES FOR PRODUCTIVITY INCREASES; PRIOR 
CONTRACTS REQUIRED THE MAIN PORTION OF PRODUCTIVITY BONUSES 
TO BE APPORTIONED NATIONALLY TO ALL SECTORAL WORKERS. 
 
3.  NOT SURPRISINGLY, THE PACT'S MOST INNOVATIVE PROVISIONS 
FUELED FURTHER DISCORD AMONG THE UNION CONFEDERATIONS.  THE 
DEAL PROVOKED AN ANGRY REBUTTAL FROM FIOM, THE LARGEST 
METALWORKERS FEDERATION (WITH SOME 30% OF ALL EMPLOYEES IN 
THE SECTOR, AND OVER HALF OF UNIONIZED WORKERS, ON ITS 
ROLLS).  FIOM'S PARENT CONFEDERATION, CGIL, IS ITALY'S 
LARGEST AND MOST MILITANT TRADE UNION CONFEDERATION.  IT HAS 
LONG OPPOSED ANY CHANGES TO ITALY'S TRADITIONAL PRACTICE OF 
NATIONAL CONTRACTS THAT SET WAGES, BONUSES AND WORK 
CONDITIONS FOR ALL WORKERS, FEARING THEY WOULD ERODE 
WORKERS' WAGES/LIVING STANDARDS AS EMPLOYERS SHOP FOR THE 
LOWEST POSSIBLE LABOR COSTS IN THE COUNTRY.  THE OTHER 
CONFEDERATIONS' AGREEMENT TO THE CONTRACT NOT ONLY LEAVES 
FIOM/CGIL STANDING ALONE IN PRINCIPLE; IT ALSO LEAVES THE 
FEDERATION CONFRONTING A LEGALLY-BINDING CONTRACT THAT 
APPLIES TO ITS MEMBERS AS WELL. 
 
4. ALTHOUGH ITALY'S CONSTITUTION UPHOLDS THE CONCEPT OF 
                       UNCLASSIFIED 
 
PAGE 04        ROME  02177  01 OF 02  161244Z 
COLLECTIVE REPRESENTATIVE CONTRACTS THAT APPLY TO ALL 
WORKERS IN A SECTOR, PARLIAMENT HAS NEVER ADOPTED 
LEGISLATION TO IMPLEMENT THE PRINCIPLE IN PRACTICE.  AS A 
RESULT, THE JUDICIARY STANDS AS SOLE ARBITER OF WHETHER A 
CONTRACT IS VALID AND "REPRESENTATIVE."  PAST RULINGS 
GENERALLY HAVE DEEMED LABOR AGREEMENTS NEGOTIATED AND SIGNED 
BY UNIONS AFFILIATED WITH THE MAIN CONFEDERATIONS, EVEN IF 
THEY REPRESENT A MINORITY OF WORKERS, AS REPRESENTATIVE AND 
APPLICABLE TO ALL WORKERS IN THE SECTOR.  FIOM/CGIL IS 
EXPECTED TO EMPLOY DECIDEDLY ITALIAN TACTICS TO CONFRONT THE 
"IMPOSED CONTRACT," NOISILY STRIKING TO PROTEST THE NEW 
PACT'S PROVISIONS AND THREATENING TO CHALLENGE LEGALLY ITS 
APPLICABILITY WHILE ITS MEMBERS QUIETLY POCKET THE WAGE 
INCREASES (WHICH IT CLAIMED WERE INADEQUATE) PROVIDED UNDER 
THE AGREEMENT. 
 
5. EMPLOYERS ARE PLEASED, VIEWING THE AGREEMENT AS THE FIRST 
PRACTICAL MANIFESTATION OF THE OTHER TWO UNION 
CONFEDERATIONS' COMMITMENT TO A NEW TYPE OF LABOR-MANAGEMENT 
COOPERATION.  THAT COMMITMENT WAS FIRST AGREED BY THE 
GOVERNMENT, THE TWO CONFEDERATIONS AND EMPLOYERS IN LAST 
SUMMER'S "PACT FOR ITALY," A BROAD STATEMENT OF PRINCIPLES 
THAT FIRST SPLIT THE THREE LABOR CONFEDERATIONS (WITH CGIL 
REFUSING TO SIGN AND STRIKING IN PROTEST).  EMPLOYERS' 
 
                       UNCLASSIFIED 
 
                           UNCLASSIFIED     PTQ9032 
 
PAGE 01        ROME  02177  02 OF 02  161244Z 
ACTION DRL-01 
 
INFO  LOG-00   AGRE-00  AID-00   CEA-01   CIAE-00  COME-00  CTME-00 
      INL-00   DODE-00  ITCE-00  DOTE-00  ANHR-00  SRPP-00  EB-00 
      EXME-00  EUR-00   E-00     FAAE-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  ACE-00   SP-00 
      SSO-00   SS-00    STR-00   TEST-00  TRSE-00  USIE-00  G-00 
      SAS-00     /008W 
                  ------------------66324C  161319Z /38 
R 161242Z MAY 03 
FM AMEMBASSY ROME 
TO SECSTATE WASHDC 9959 
DEPT OF LABOR WASHDC 
INFO LABOR COLLECTIVE 
EUROPEAN POLITICAL COLLECTIVE 
AMCONSUL MILAN 
AMCONSUL FLORENCE 
AMCONSUL NAPLES 
 
UNCLAS SECTION 02 OF 02 ROME 002177 
 
SIPDIS 
 
DOL FOR ILAB/BRUMFIELD 
DEPARTMENT FOR DRL/IL AND EUR/WE 
 
E.O. 12958:  N/A 
TAGS:  ELAB, ECON, IT 
SUBJECT: METALWORKERS' PACT MAY SPUR BROADER LABOR 
FLEXIBILITY 
                       UNCLASSIFIED 
 
PAGE 02        ROME  02177  02 OF 02  161244Z 
 
ASSOCIATIONS BELIEVE THE METALWORKERS CONTRACT WILL 
STIMULATE BUSINESS AND INVESTMENT AND, PERHAPS, STIMULATE 
GROWTH IN SOUTHERN ITALY BY ALLOWING COMPANIES TO TAKE 
ADVANTAGE OF REGIONAL INCOME/COST-OF-LIVING DISPARITIES. 
 
6. EVEN AS IMMEDIATE ATTENTION SHIFTS TO NEGOTIATION OF 
OTHER SECTORAL CONTRACTS, BOTH LABOR AND MANAGEMENT HAVE 
THEIR GAZES FIXED FIRMLY ON RENEGOTIATION LATER THIS SUMMER 
OF THE UMBRELLA ACCORD GOVERNING THE TERMS OF COLLECTIVE 
BARGAINING AGREEMENTS.  THE PARTIES TO THE METALWORKERS 
CONTRACT WILL WORK TO EMBED ITS PROVISIONS IN THIS UPDATED 
UMBRELLA AGREEMENT; CGIL WILL TRY TO ENSURE THEY ARE 
CONFINED TO THIS ONE SECTOR. 
 
7. THE AGREEMENT WILL PROVOKE DEBATE, IF NOT MUCH MOVEMENT, 
ON LONG-MORIBUND LEGISLATION TO FLESH OUT THE CONSTITUTIONAL 
PROVISION GUARANTEEING REPRESENTATIVE CONTRACTS.  FIOM/CGIL 
AND LIKE-MINDED LEGISLATORS FROM THE FAR LEFT HAVE VOWED TO 
PRESS FOR THE LEGISLATION'S PASSAGE.  CISL, THE SECOND 
LARGEST, "CATHOLIC" CONFEDERATION, HAS DENOUNCED THIS AS A 
GAMBIT TO GIVE THE FEDERATION, ITALY'S LARGEST, DE FACTO 
VETO POWER OVER ANY FUTURE CONTRACT; IT ARGUES THAT LABOR 
AND MANAGEMENT SHOULD WORK OUT A MUTUALLY-ACCEPTABLE 
SOLUTION WITHOUT INVOLVING PARLIAMENT.  THE SMALLEST OF THE 
THREE CONFEDERATIONS, CENTRIST UIL PRIVATELY AGREES WITH 
CGIL'S POSITION BUT IS HOLDING ITS TONGUE FOR TACTICAL 
REASONS. 
 
8. COMMENT:  THE METALWORKERS' INNOVATIVE CONTRACT IS 
ANOTHER SIGN THAT THE MOST SUCCESSFUL ASPECT OF THE 
                       UNCLASSIFIED 
 
PAGE 03        ROME  02177  02 OF 02  161244Z 
BERLUSCONI GOVERNMENT'S COMPREHENSIVE REFORM PLAN WILL BE IN 
THE AREA OF LABOR MARKETS (REFTEL).  IN SOME RESPECTS, 
THAT'S NOT SURPRISING, SINCE THE REFORMS TO DATE COME 
LARGELY WITH SUPPORT OF MUCH OF ORGANIZED LABOR; GIVEN 
ITALY'S TRADITION AND CULTURE OF CONSENSUS DECISION-MAKING, 
THE IMPORTANCE OF THAT SUPPORT SHOULDN'T BE UNDERESTIMATED. 
TO TRY TO MAINTAIN THAT APPROACH, EMPLOYERS MAY WELL DECIDE 
TO ACCEPT A MORE LIMITED SET OF THESE INNOVATIONS IN THE NEW 
ACCORD GOVERNING COLLECTIVE BARGAINING AGREEMENTS IN ORDER 
TO SECURE CGIL'S APPROVAL.  THE GOVERNMENT FACES A MUCH 
TOUGHER TEST ON PENSION REFORM GIVEN THE CONFEDERATIONS' 
UNIFIED OPPOSITION TO MOST OF ITS PROPOSED LEGISLATION 
(SEPTEL).  THE OUTCOME OF THAT DEBATE WILL GO A LONG WAY TO 
DETERMINING WHETHER THE BERLUSCONI REFORM SCORECARD WILL BE 
MODEST OR MEANINGFUL.  THERE'S LITTLE LIKELIHOOD THAT CGIL'S 
PUSH FOR REPRESENTATIVE CONTACT LEGISLATION WILL AMOUNT TO 
ANYTHING; SPLITS AMONG THE CONFEDERATIONS MIRROR THOSE 
WITHIN THE CENTER-LEFT OPPOSITION, AND THE GOVERNMENT'S 
PARLIAMENTARY MAJORITY IS SUFFICIENT IN ANY CASE TO REJECT 
AN UNWANTED BILL. 
 
SEMBLER 
 
                       UNCLASSIFIED 
 
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 2003ROME02177 - Classification: UNCLASSIFIED