Italy suicide movement (PDF)

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Italy’s Economic Suicide Movement
Protests against Renzi’s labor reforms illustrate Europe’s jobs problem.
An estimated one million people poured into the streets of Rome on Saturday to protest Prime
Minister Matteo Renzi’s modest efforts to reform Italy’s notoriously labyrinthine labor laws. Led by
the country’s largest union, the Italian General Confederation of Labor, or CGIL, the activists want to
preserve Italy’s job guarantees as they are. Call it Italy’s economic suicide movement.
Italy’s labor-market rules have remained largely unreformed since the modern Italian state was
established. Spread over some 2,700 pages, the labor code divides the labor force into two parts.
Older workers benefit from the full weight of the law, including ironclad protections against being
laid off, fired or disciplined, whether for performance or economic reasons. That leaves the
remainder of the work force, predominately young, to make do with temporary, freelance and other
forms of itinerant work. Then there is the Cassa Integrazione
Guadagni. Under this income-assistance scheme, businesses that need to downsize can put some
workers on “standby,” and the government will cover a significant share of the normal salary until
the company can hire back the worker. The program strains the state’s budget, discourages workers
from seeking other jobs, and prevents struggling companies from downsizing to stay competitive.
Need to fire a worker for poor job performance? To do so, businesses must persuade a judge that no
alternative short of termination was available— process of administrative hearings and litigation
that can take months and drain company resources. The World Economic Forum in its 2014-15
assessment of labor-market efficiency ranked Italy 141 out of 144 countries for hiring and firing
practices, just above Zimbabwe. Intractable national unions, which are quick to strike and slow to
compromise, exacerbate all these problems. Italy has the largest number of small businesses in the
European Union not because companies don’t want to grow, but because they fear growth will
mean having to negotiate with the militant national unions like CGIL.
The unsurprising result of all these barriers to firing and efficiency is that businesses are reluctant to
hire. The official unemployment rate stands at 12%, and half of Italy’s young people are
unemployed. Given the scale of the problem, Mr. Renzi’s proposed reforms are a start but far from
The Prime Minister wants gradually to phase out the dual system with the introduction of a single
contract that will eventually cover all workers; shift the employment protection from the workplace
to the individual employee; and reduce the red tape required to form temporary employment
contracts. For this, CGIL boss Susanna Camusso has accused Mr. Renzi of abandoning “social
dialogue” to a degree “only seen once before, with Mrs. Thatcher.”
Italy should be so lucky as to have an Iron Lady. The people protesting this weekend weren’t
marching for reasonable workplace protections. They were demanding guaranteed unemployment

for millions of their fellow citizens. For the sake of all those out-ofwork Italians, and especially the
young, Mr. Renzi should stand firm for reform.

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