US embassy cable - 03ROME2846

UNCLAS  ROME 002846 
 
SIPDIS 
 
 
DEPARTMENT FOR DRL/IL AND EUR/WE 
DOL FOR ILAB/BRUMFIELD 
 
E.O. 12958:  N/A 
TAGS: ELAB, ECON, PGOV, IT, UN 
SUBJECT:  Labor Rights Referendum Fails Over Low Turnout, 
Relieving All Quarters 
 
1. SUMMARY: A year-long political drama over an obscure but 
symbolically important provision of Italian labor law closed 
with a whimper on June 16, when a national referendum on the 
provision drew only a quarter of registered voters and 
failed to qualify as valid.  The dispute over the provision, 
which governs compensation for workers who are improperly 
dismissed, was always more about politics than substance. 
The referendum confirmed what many observers had already 
concluded: that most Italians did not view the provision as 
an inviolable right affording them important protections. 
The government, mainstream opposition and two of the three 
labor confederations have found different vehicles to 
develop pragmatic consensus on much-needed reforms to 
Italy's rigid labor markets.  All quarters hope the dispute 
over Article 18 will soon quietly fade from view.  The 
referendum served its most useful function beforehand, in 
stimulating progress on a package of meaningful labor market 
reforms expected to enter into force in the fall.  End 
Summary. 
 
The referendum (almost) no one wanted. 
 
2. On June 15-16, Italians voted on a proposal to broaden 
coverage of a labor law provision that was a major locus for 
political confrontation in 2002.  The provision, Article 18 
of the worker's statute, governs employees' right to 
reinstatement or compensation if they are improperly fired. 
The referendum called for extending the provision to all 
Italian workers; currently, small enterprises with 15 
employees or less (over 80 percent of the Italian workforce) 
are not bound by Article 18's provisions.  It was held on 
the initiative of the far-left Communist Renewal (RC) party 
and FIOM, the biggest, most radical metalworkers union. 
FIOM and its parent confederation, CGIL, collected most of 
the signatures required to schedule the referendum. 
 
3. Although those who turned out voted overwhelmingly in 
favor of the provision (more than 85 percent), most Italians 
chose not to vote.  Less than 26 percent of the electorate 
participated, well below the 50 percent-plus-one vote 
required to validate the results.  After a year of protests 
and political skirmishes over the issue, the public lost 
interest in ideological slogans on vested rights and in 
personal competition between leaders.  Moreover, few workers 
considered Article 18 a crucial protective measure, 
especially in the small companies, for which flexibility is 
the key for competitiveness, that were the referendum's 
target.  Parliament also passed a meaty labor market reform 
package, with the support or acquiescence of most of the 
social partners, after the constitutional court approved the 
referendum in January. 
 
4. Almost all political parties encouraged voters to stay 
home and abstain; only Communist Renewal actively campaigned 
in favor.  A committee organized by members of PM 
Berlusconi's Forza Italia party and supported by Labor 
Minister Maroni worked just as hard on a "no" campaign; 
Italian cities were carpeted with the two campaigns' 
respective posters.   Two of the three major union 
confederations, CISL and UIL, also favored abstention, 
characterizing the referendum as the wrong vehicle 
addressing the wrong issue.  Even CGIL's leader, Guglielmo 
Epifani, paired his call for a 'yes' vote with a new reform 
proposal, based on a reimbursement system, and suggested 
that the referendum was a mistake.  Epifani sought to 
balance a divided membership and find a way to reflect 
FIOM's central role in collecting signatures for the 
referendum, as well as the large portion of the 
confederation's membership who supported the campaign in 
favor of Article 18 promoted by Epifani's predecessor, 
Sergio Cofferati.  In short, most of the major participants 
in labor-management relations and labor market reform will 
breath easier now that the referendum has been defeated. 
 
.was prompted by the political fight everyone sought 
 
5.  Article 18's transformation from political lightning rod 
to afterthought provided a great window into Italian 
political culture and calculus.  After Berlusconi's 
resounding victory in the 2001 elections, the center-left 
was hamstrung by the lack of a credible political platform 
and riven by disputes among its constituent parties and 
their leaders; it badly needed an issue around which it 
could rally the faithful and sharpen differences with the 
new governing coalition.  For its part, the government 
 
 
announced its intention to abandon the social partnership 
called `concertazione' - a time-honored Italian form of 
consensus-building that afforded unions substantial roles in 
social and economic policymaking.  Both government and 
opposition (with prompting from CGIL, which decided to use 
the issue to galvanize opposition to the Berlusconi 
coalition) settled on revisions to Article 18 as the ideal 
vehicle to address their respective objectives. 
 
6. Italy's trade union confederations were threatened by 
their potential loss of influence, and a Cofferti-led CGIL 
decided to use the confederation's organizational talents 
and influence on public opinion to lead an ideological 
campaign against the government based on the defense of 
Article 18 -- an approach initially supported by the other 
two major confederations as well.  Cofferati's approach 
dovetailed nicely with that of Communist Renewal, which 
tried to use the Article 18 debate to peel away supporters 
disgruntled by the center-left's perennial infighting. 
 
7. When the Berlusconi government agreed in July 2002 to 
seek broad agreement on social and economic policy via a 
return to "concertazione," the more centrist-minded CISL and 
UIL confederations abandoned the campaign against Article 18 
and agreed to support an experimental suspension of its 
provisions for some workers.  Today, thanks to a new CGIL 
leadership and the new strength of the opposition, the 
reform of labor market is largely considered a priority for 
which both sides are proposing more pragmatic solutions to 
promote job creation and new kinds of flexibility and social 
security. 
 
8. The recent electoral success of the mainstream center- 
left and the electorate's apparent impatience with the lack 
of substantial reforms and improvements in Italy's economic 
performance have boosted efforts to develop a shared 
pragmatic approach to labor market reform.  A proposed 
reform of Article 18, based on arbitration and financial 
compensation, is under discussion within the center-left, 
linked to the request for a new the Statute to provide the 
new categories of nontraditional, "atypical" workers with 
the types of rights and benefits, including public pension 
and social services, enjoyed by classic full-time employees. 
A compromise over this additional reform proposal could 
finally resolve an issue that until now has generated far 
more theatrics than results. 
 
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	2003ROME02846 - Classification: UNCLASSIFIED