Italian Prime Minister Mario monti's Labor reform plan, a centrepiece of his efforts to reassure investors, is vulnerable to further changes in Parliament and stoked new tensions on Saturday among the coalition that backs his government.
Earlier this month Monti agreed to water down a measure to ease firing rules as the CGIL, Italy's biggest union, threatened a nationwide strike, and under pressure by the Democratic Party (PD), the government's second biggest ally. Now it is former premier Silvio Berlusconi's People of Liberty (PDL) bloc, backed by employers' lobby Confindustria, that is seeking changes. "The labor market law must not further complicate the lives of businesses and the self-employed," Fabrizio Cicchitto, the PDL's chief whip in the lower house, said in a statement.
Labor market reform is posing the first major political challenge for Monti's government of technocrats, at a time when Spanish budget problems have reignited fears that the euro debt crisis could intensify, sucking in much bigger economies including Italy. Tiziano Treu, who is shepherding the bill through the Senate for the PD, accused the PDL of "revanchism" and said that only minor changes to the new labor rules are possible in order to keep the reform "balanced." Labor Minister Elsa Fornero responded by saying that the text of the labor bill was not set in stone, but that failure to pass the overall reform package could spell the end of the five-month-old government that took power to stave off a Greek-style debt default. "No one is saying that the reform is untouchable and must pass the way it was presented," Fornero told reporters in the southern city of Reggio Calabria on Saturday. "Until now we've received criticism for being too incisive or not incisive enough, but on one point we are determined: If this reform does not pass in parliament, we will go home," she said.
Monti has called a meeting with the leaders of the three blocs that back his government for Tuesday to try to settle differences over the labor reform, and to talk about what can be done to boost growth, the party secretaries said on Saturday. At the end of last year, as Italian 10-year borrowing costs soared above 7 percent, Monti passed a sweeping mix of tax hikes and spending cuts to shore up public finances, and undertook a major overhaul of the pension system, which was largely praised by economists. The government has been striving to impose painful reforms on a debt-burdened economy that has been among the most sluggish in the euro zone for more than a decade, and the labor market changes are being closely watched as a test of Monti's ability to push through far-reaching changes to foster growth. Recession has been deepened by government austerity measures and the parties that back Monti in parliament have become noticeably more critical of the former European Commissioner as local elections, due on May 6-7, approach. So far this year, despair has driven 23 small business owners to commit suicide, the CGIA of Mestre, a small business association near Venice, said on Saturday. Separately, Italian truckers' lobby Trasportounito announced its members would strike for five days starting on May 28, complaining the government was ignoring the industry's needs. Truckers are seeking in part to offset the cost of higher fuel taxes, which are supposed to bring the state 5.7 billion euros in extra revenue this year.