Italy Cabinet approves first planks of Renzi's labor reform

December 24
10:19 PM 2014

Italy's government on Wednesday began drawing up the details of a reform that Prime Minister Matteo Renzi said will "revolutionize" the country's labor market when it takes effect some time next year.

The cabinet approved key parts of the so-called Jobs Act to ease firing restrictions, extend the duration of jobless benefits and introduce a new contract type offering compensation in case of dismissal that gradually increases with seniority.

At the end of a three-hour Cabinet meeting, Renzi told reporters the measures were a "Copernican revolution" and said the rules making firing easier meant there were now "no alibis" to keep potential investors away from Italy.

However the Jobs Act, one of several reforms that Renzi hopes can revive a stagnant economy and cut record unemployment, is still months away from becoming law. The cabinet will have to approve other parts of the package in subsequent meetings and it must then be scrutinized by parliamentary committees.

A key change approved on Wednesday is that firms with more than 15 employees will be able to fire workers for business reasons without the risk of having to reinstate them even if the dismissal is ruled unlawful.

Unjustified dismissal will require payment of compensation but the worker will not be able to get his job back as is the case at present. The change will not affect the public sector or people already in work -- only new hires in the private sector.

The current rules allowing for reinstatement do not affect companies with less than 16 employees, which account for close to half of Italy's workers.

Italy's unions have already held strikes against the reform plan and vowed more protests to try to stop it becoming law. Maurizio Landini, head of the main metal workers union, FIOM, said it meant "fewer rights for everyone" and ensured workers had "nothing to celebrate at Christmas".

Among other steps approved by the cabinet on Wednesday was a decree to save troubled steelmaker Ilva, which was placed under special administration last year after being accused of failing to contain toxic emissions.

Renzi said the state would invest more than a billion euros in the Taranto plant, which is Europe's biggest by output capacity and a major employer in the impoverished south of the country. He said the state's intervention in the unlisted company would last between 18 months and three years.

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