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Italy’s Labor Law Reforms Which Aren’t

Italy’s Mario Monti government appears to be becoming weaker with every day that passes.  This does not bode well for the passing of much needed labor reforms which may encourage Italy’s businesses to employ more Italians.

A big problem for Italy is that the labor reforms currently before Italy’s parliament won’t actually reform anything much.

Today in Italy’s parliament, two confidence votes are to be held on the labor reforms which won’t.  These votes should prove more or less decisive and the non-reforms will more a step closer to realisation.  However it is uncertain whether the non-reforms will survive both the votes.  Confidence votes, as is commonly the case in Italian politics, are being used to speed the passing of the new legislation.

Reforms Which Don’t

The main problem with the reforms, as mentioned at the start of this article, is that they don’t really seem to change much.  Initially, the intention was to make it easier and cheaper to sack employees, but these initial proposals have been watered down to such an extent that nothing will change.  Letting employees go, which is time consuming and prohibitively expensive now, looks as if, for the most part, it will remain time consuming and prohibitively expensive after the ‘reforms’ have passed, if they do.

Italy’s labor law system desperately needs reforming, as you will discover if you read, and I thoroughly recommend you do, Stephan Faris’ article entitled Italy’s Labor Pains on Bloomberg Business Week.

Italy’s main unions are not happy with the reforms, even in their watered down form, and, somewhat surprisingly, Italy’s businesses do not consider the reforms a priority.

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Businesses in Italy would much prefer to see tax cuts which, it has to be said, will make it easier for companies to afford to take on new employees.  And ahead of lower taxes and labor law reforms, Italy’s businesses place sorting out Italy’s costly and inefficient public sector.  Italy’s expensive public sector is also one of the slowest payers in the Boot.

Probably the best thing to do is to let the reforms pass and see what happens.  If the effects are positive, then fine.  On the other hand, if the reforms do not produce the desired results, (and they will not) revise the law.  Perhaps introducing more radical changes to one or two Italian regions first would allow Italy’s government to see whether they work.  If this is turns out to be the case, the genuine reforms could then be extended to the rest of Italy.

Whatever happens today in Italy’s parliament, the reforms which may pass do not look as if they are worth the parliamentary time that has been spent on them.  The ROI for Italy is likely to be negligible.

Perhaps one of the reasons why Italy is unable to pass sensible reforms is that the reformers genuinely fear for their lives.

Very shortly, the Eurozone may well go down the plughole.  Decent labor law reforms would allow Italy to cope with this eventuality better, except Italians do not seem to appreciate this.


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