Monti may need market backup for labour battle

LONDON: Labour reforms announced by Italian prime minster Mario Monti have enraged unions and weakened unity within the coalition government. A wave of strikes could rattle confidence, and pressure politicians to dilute reforms in parliament. Bond markets may need to go on strike too.

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CONTEXT NEWS

- Italian prime minister Mario Monti announced a wave of labour reforms on March 20, despite opposition from CGIL, the country's largest union. The reforms follow months of discussions between the government, industry and unions.

- The reforms are designed to make the Italian labour markets fairer by overcoming the duality between permanent employees, who are protected by strong employment laws, and temporary workers, who have fewer rights and welfare support.

- A central pillar of the reforms is a modification of Article 18, which stipulates that permanent employees who are wrongfully dismissed should be reinstated and paid any salary owed during the interim. Critics of Article 18 argue that it makes companies reluctant to invest in Italy, crimping foreign direct investment.

- The reforms also seek to discourage temporary contracts by increasing social security payments for companies that use them, and giving rebates when temporary workers are given permanent contracts. The benefits system will also be expanded to cover a wider range of employees.

- Reuters: Italy's Monti runs into trouble over labour reform