Fair or Foul? Comply and Reform! The New Politics of Soft

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Why did I accept to be a European Commissioner in spite of having always
shunned away opportunities in Italian politics? Because I liked policy, I did not
like political affiliation to this or that political party. So when I was offered to be a
European Commissioner in 1994 (…) I said “Great. There [in Brussels] I can do
policy without doing politics”.
Mario Monti, former Italy’s Prime Minister,
Italian Political Science Association Meeting, Rome, 13 September 2012.
Central banks should be independent from governments. These days it would
seem necessary to state that governments are indipendent from [central] banks.
Giulio Tremonti, former Italy’s Treasury Minister,
TV and web talk show “Servizio Pubblico”, 10 May 2012.
After six months of negotiations between the government led by Mario Monti on
the one hand and the social partners as well as the parties making up the majority
in parliament on the other, on the eve of the crucial European Council summit of
28-29 June 2012 the Italian Parliament approved the labour market and
unemployment benefit reform presented by the Minister of Labour and Social
Policies, Elsa Fornero. Despite tensions between the government and chief
representatives of the majority supporting it, Law 92 of 2012 was approved by the
Chamber of Deputies with a vote of confidence on a text previously approved by
the Italian Senate – also with a vote of confidence. The successful enactment of
the labour reform was seen as a way to strengthen the government’s position at
the upcoming European Council summit in Brussels, which was about to take
crucial decisions concerning Italy, among which the enactment of what Italian
media called the “anti-spread shield”, a programme that later evolved in the
Outright Monetary Transactions run by the European Central Bank (ECB)2.
The above description summarises some of the main features of the politics
behind the Fornero reform: the limitations imposed by the political and financial
context, at both the international and supranational level, and the opportunities
such limitations offered to the Italian government to promote its policy views on
labour matters, unemployment compensation, and the involvement of the social
partners in the decision-making process; the mode of negotiation with the social
This work is based on about 25 interviews to key informants, conducted in Rome in September 2012,
May 2013 and July 2013 with the financial support of the project on “Causes, processes and
consequences of flexicurity reforms in the EU: lessons from Bismarckian countries” of the Collegio Carlo
Alberto of Turin.
2 Within this programme, formally launched in September 2012, the ECB can purchase on the secondary
market sovereign bonds issued by Eurozone members with the aim to lower their yields. It differs from a
quantitative easing operation insofar as full sterilization occurs (that is, the ECB absorbs liquidity for the
overall value of purchased bonds, so no new monetary base is created). See also below.
partners, which highly constrasted with the Italian experience of the past twenty
years; the relationship between the Monti government and the parliamentary
majority supporting it, as well as the mounting tension within (rather than
between) the parties making up such majority in relation to whether the
compromise reached was actually acceptable. Furthermore, the content of the
reform itself was highly contentious, as it concerned: rules for the employment
protection of workers with open-ended contracts, regulations about non-standard
work (including some types of self-employment), the reform of unemployment
insurance and short-time work and its interaction with the pension reform
approved in December 2011. Indeed, each of these aspects is inextricably linked to
a complex set of material interests, of causal representations – which might or
might not be based on empirical evidence – regarding the effects of certain
measures, public policies, or institutional structures, and of symbols pertaining to
collective and individual identities (such as Article 18 of the Workers’ Statute or
the definition of freelance workers).
This paper aims to reconstruct the main steps of the decision-making process
which led to the approval of the Fornero reform, while also illustrating its main
features. Furthermore, it puts forward some preliminary hypotheses about the set
of causal factors influencing the enactment of the reform and provides an
assessment of its possible effects. The paper is organised as follows. The next two
sections describe the institutional antecedents of the reform and the functional
reasons behind its introduction. A key role for the enactment of the reform was
played by the commitments made by the Berlusconi government with the
Community institutions at the time when the sovereign debt crisis hit Italy (section
three) and the pension reform approved in December 2011 (section four). The
following sections focus once again on the labour market, reconstructing the
various phases of the reform process (negotiations with the social partners –
section five – and then with the political parties, as well as the parliamentary phase
– section six). Section seven provides a preliminary evaluation of the reform,
focusing specifically on the regulation of labour relationships and on
unemployment benefits. The last section concludes, offering some insights to
interpret the reform process causally.
The last fifteen years, from the “Treu Package” of 1997 onwards, have been
characterised by a long series of measures regarding labour policies. Considering
the regulations on labour relationships only, the main measures before the
Fornero reform include: the introduction of temp agency work in 1997, the
transposition of the European directives on part-time work of 2000 and on direct
hire fixed-term contracts of 2001, the various changes introduced by the Biagi Law
of 2003, as well as a partial re-regulation in 2007. All these measures share a
common feature: they are reforms “at the margins” or dual reforms, i.e. they
introduce or extend or modify the use of fixed-term labour contracts, however
without affecting the rules concerning open-ended contracts3.
Similar reforms have been the norm in Europe in the last few decades. Yet Italy is
the OECD country in which, from the early 1990s to the present day, it has been
made the easiest to recruit personnel by using fixed-term contracts (Berton et al.
2012)4. As a consequence, over the last twenty years, the share of employees with
fixed-term contracts has tripled and reached the average EU levels. In 1990, this
share was just 5% in Italy, half of the French, German and average EU-15 level
(10.5% in all three cases), but it increased to 15% in 2012, while in the same
period it grew to 15% in France, to 14% in Germany, and to 14% in the EU-15.
Meanwhile, the share of employees with fixed-term contracts in the 15-24 age
bracket increased fivefold, from 11% in 1990 to 53% in 2012 (from 28% to 43%
in the EU-15, from 38% to 55% in France, from 34% to 53% in Germany)5.
Despite the reforms at the margins of the labour market, the system of what the
OECD calls “out-of-work income maintenance and support”, basically comprised
of unemployment benefits and short-time work6, was not modified – at least until
the Fornero reform – due to the opposition of the trade unions and employers’
associations (Treu 2008)7. This system rests in Italy on the distinction between
general, rights-based unemployment insurance benefits on the one hand (Italy has
no unemployment assistance, or minimum income schemes for that matter), and
discretionary schemes (short-time work and a special unemployment benefit called
“mobility allowance”) on the other, with the latter being more generous especially
in terms of duration but usually not available to non-standard workers8. However,
before the 2012 reform non-standard workers found it very difficult to obtain
even rights-based unemployment benefits, due to eligibility requirements, in
particular a two-year minimum vesting period in the unemployment insurance
fund, alongside the required contributory record. Berton et al (2012) estimated
that only 60% of direct hire fixed-term workers would be eligible for
unemployment benefits, half of temp agency workers, and 20% of apprentices
(due to limitations on their registration for unemployment insurance). Moreover,
registration to the scheme was only possible for employees, fencing out all selfFor a thorough analysis of the topic and rigorous definitions, see Berton et al. (2012).
On liberalization of fixed-term contracts in Europe (both direct-hire and temporary agency ones), see
Davidsson (2011).
5 Source: Eurostat, Labour Force Survey.
6 Short-time work (also called partial unemployment) provides a wage replacement allowance in order to
compensate a temporary reduction in working time set in place in order to ensure the continuity of an
existing employment relationship. German Kurzarbeit is a short-time work scheme. See Sacchi et al (2011).
7 Out-of-work income maintenance and support is what in the Italian tradition is called ammortizzatori
8 There are two types of short-time work schemes in Italy: the conjunctural one (Cassa integrazione guadagni
ordinaria - CIGO), and the structural one (Cassa integrazione guadagni straordinaria – CIGS). Although
originally meant to retain skilled workforce during crises (workers in short-time work are still employed),
these schemes have been used as functional substitutes of rights-based unemployment benefits,
particularly for the core industrial workforce (Sacchi et al, 2011). The mobility allowance is a non-rightsbased unemployment allowance, reserved to open-ended workers with at least one-year’s firm seniority,
made redundant by companies eligible for the CIGS. These schemes do not bestow upon the worker any
individual right to a benefit: these are discretionary schemes, dependent upon approval on the part of the
public authority after joint examination by trade unions and the firm.
employed workers (more than 20% of Italy’s employed population), including
freelance workers, occasional workers, and wage and salary independent
contractors (for whom ad-hoc unemployment allowances were introduced in
2009, albeit with very limited coverage). Hence, the Italian labour market features
a combination of flexibility and insecurity. Instead of the flexicurity typical of the
Danish model, Italy is characterised by a system of “flex-insecurity” (Berton et al
Yet, the flexibility of the Italian labour market did not exclusively derive from
non-standard contracts. Although it is generally believed that the Italian labour
market is extremely immobile and dominated by permanent contracts, the
empirical evidence confirms that it is not so. Actually, as more accurate studies
show, the Italian labour market is very dynamic and has been so for decades, since
well before the introduction of non-standard contracts (Contini and Revelli, 1992;
Contini and Trivellato, 2005). Also when looking at evidence based on the
institutional characteristics of the labour market, such as the well-known
employment protection index devised by the OECD, the Italian employment
protection system for workers with open-ended contracts appears to be
characterised by much greater flexibility than the German or French systems and
Italy’s position is virtually indistinguishable from that of Denmark, notoriously a
very flexible country. A more careful analysis reveals that the OECD index
“rewards” the fact that, for example differently from Germany, in Italy no
monetary compensation is automatically envisaged in case of dismissal, while the
possibility that a worker might be reinstated following the ruling of a judge makes
less of a contribution towards the overall “rigidity” index9. Nevertheless, the fact
remains that the Italian labour market is much more flexible than generally
believed by the press and by international economic operators. The empirical
evidence shows that the much talked about “job for life” does not exist, except in
the public administration. Even among senior workers (between 36 and 50 years
of age), about one third of full-time open-ended contracts end within two years of
the beginning of the observation period and in four cases out of ten these workers
do not immediately find employment after the end of their contract10.
It can be concluded that the Italian labour market is indeed flexible but, at the
same time, it is also highly segmented. On the one hand, a sharp line divides
workers with open-ended contracts from non-standard workers, who, as explained
above, find it much harder to access the social protection system, have lower
salaries, and receive less training, which makes it harder for them to be hired by
companies other than the ones currently employing them11. The consequence of
this is a strong empirical link between contract flexibility and economic
precariousness, assessed over a medium-term period (Berton et al 2012). On the
other hand, workers with open-ended contracts are not treated equally. It is true
that, in case of dismissal, workers in Italy do not automatically receive any type of
monetary compensation, but those who work in companies with 15 or more
10 Berton et al. (2012, pp. 63-69).
11 Less training also reduces the productivity and competitiveness of the economic system, an effect
which seems to have occurred in Italy; see Lotti and Viviano (2010).
employees are better protected when they successfully challenge the validity of the
reasons leading to their dismissal in front of a judge. Pursuant a 1966 law, as
modified in 1990, dismissal must be justified, and can only occur for “just cause”
(extremely serious disciplinary reasons), “justified subjective reasons” (basically for
various, more or less serious, disciplinary reasons, or due to low productivity), or
for “justified objective reasons” (i.e. economic reasons “related to the production
activities, the organisation of labour, and the regular functioning thereof”). In large
firms (with 15 or more workers), the matter is further addressed by a 1970 law
(known as the Workers’ Statute) in its noted Article 18. Before the Fornero
reform, this provision stated that, if the appointed judge ruled that dismissal was
unfair (that is, unjustified), an individual working in a company with 15 or more
employees was allowed to choose between monetary compensation equal to 15
monthly salaries, and full reinstatement into his or her previous job (thus retaining
seniority and receiving all monthly salaries and all social security contributions due
for the period elapsed between dismissal and reinstatement, without any ceiling).
Conversely, in similar cases occurring in businesses with fewer than 15 employees,
the enhanced protection granted by “Article 18” did not apply. Thus, pursuant the
1966 law as modified in 1990, it was – and still is – up to the company to choose
between recruiting the worker again (which is, however, very different from full
reinstatement, as it means starting a new labour relationship, without allowing the
worker to retain seniority and to receive the salaries and contributions lost) or
paying an amount varying between 2.5 and 14 salaries (in the case of workers with
at least 20-year seniority with the company). This “institutional dualism”
(Emmenegger et al 2012) was made even stronger by the judicial practice, which
tended to interpret the illegitimacy of economic reasons in a broad sense, thus
favouring the workers (Ichino 1996). From now on, this paper will refer to the
regulations for individual dismissal in companies with 15 or more employees, the
only regulations substantially modified by the Fornero reform.
The implications of Article 18 are apparent for what concerns equality among
workers and the segmentation of the labour market. Its empirical impact on the
actual functioning of the labour market is however debatable. At least in larger
companies, individual dismissal usually takes on the form of a procedure for
collective dismissal (more than 5 employees within 120 days in the same
Province), in which the number of dismissed workers is then decreased to one by
means of negotiations between the company and the trade unions. Alternatively,
the employer offers to compensate the employee if the latter agrees not to
challenge the dismissal procedure in court. Also the empirical evidence concerning
the effects of Article 18 on the Italian firm system, and consequently on the
economic system as a whole (contributing to firm dwarfism and fragmentation of
the production system, and to steering the production specialisation model
towards traditional sectors with limited room for product innovation), seems
extremely controversial12. Rather than by empirical evidence, however, the
decisions of economic operators are often influenced by their own beliefs.
Moreover, the degree of uncertainty regarding the outcome of individual dismissal
procedures (as well as related times and costs, ascribable to the long duration of
See the literature quoted in Accornero and Como (2003) and in Baccaro and Simoni (2004).
civil lawsuits in Italy and to the absence – before the Fornero reform – of a ceiling
applied to salary and social contribution payments in case of reinstatement) is
often listed among the factors which prevent foreign investments in Italy.
The regulations concerning dismissal, those for economic reasons in particular,
have been a burning issue in Italy since the mid 1990s, when stances of both social
and political actors became more radical with respect to it. Actually, in the mid1980s the issue was a much less divisive one, as testified by the fact that the social
partners had agreed, within the National Social and Economic Council, that
reintegration should be maintained only for dismissals declared by the judge to be
discriminatory (and therefore null and void), while monetary compensation should
be envisaged in all other cases (notably, when dismissal for economic or even for
disciplinary reasons was found to be illegitimate) (Mengoni 1986)13. The regulatory
framework was at the time even more complex than now, due to the overlapping
of different thresholds in the 1966 and 1970 laws and ensuing multiple
segmentations. In 1990 a referendum was promoted by the radical left party
Proletarian Democracy, aimed at extending enhanced protection provided by
Article 18 to all workers, irrespective of the firm size. The referendum was not
held because, in the meantime, a law was enacted in 1990, setting the regulatory
framework mentioned above. In the late 1990s unions and employers tried to
agree on an arbitration procedure to avoid taking wrongful dismissal litigation to
court, but the employers’ association Confindustria insisted on the arbitrator not
being bound by law, but rather judging according to the rules of equity, a request
unacceptable to unions (Accornero and Como 2003). The debate became
polarized in the aftermath of a referendum held in 2000 to abolish Article 18,
promoted by the free-market, left libertarian Radical Party. Confidustria sided with
the promoters and, despite the referendum being null, for the quorum was not
met, its attempt at changing the rules outside negotiating tables upset the unions.
Another referendum – this time aimed at extending Article 18 to all firms
irrespective of size – was held in 2003, promoted by the Party of Refounded
Communism, but this too failed because the quorum was not met (Baccaro and
Simoni 2004). In the meantime, the government led by Silvio Berlusconi had tried
in the early 2000s to modify Article 18, but it backed away after the unions
declared a general joint strike in April 200214. At the end of the decade, in 2010,
another Berlusconi government tried again to modify employment protection
against dismissal, introducing a provision concerning dispute resolution on the
termination of labour contracts, but this attempt was again unsuccessful. The
Trade unions were represented at the highest level in the committee elaborating the proposals. For
instance, both CGIL and UIL were represented by their leaders (Luciano Lama and Giorgio Benvenuto,
14 There are three main unions in Italy: the left leaning CGIL (Confederazione Generale Italiana del Lavoro)
and the more centrist UIL (Unione Italiana del Lavoro) and CISL (Confederazione Italiana Sindacato Lavoratori).
CGIL is the main union, followed by CISL. Over the recent years, CGIL’s powerful metalworker
federation, FIOM, has often taken radical positions that cannot be ignored by the top officers of the
confederation. See Sacchi (2013).
proposal envisaged the possibility that, when establishing a new labour
relationship, the employer and the worker might include a provision in the labour
contract, subtracting the settlement of disputes about termination from the ruling
of the labour judge to empower an arbitration board that should decide on the
basis of a fairness principle and not necessarily according to the law. This
provision would have allowed employers to bypass article 18 of the Workers’
Statute, at least insofar as new labour contracts were concerned, but it was
withdrawn by the government when the President of the Republic objected that it
might be unconstitutional.
As the financial storm was bearing down on Italy in summer 2011, the reform of
the labour market and of out-of-work income maintenance and support gained
momentum again. In a resolute letter to Prime Minister Berlusconi dated 5th
August 2011, when the yield differential between the German and Italian bonds
reached 4 percentage points (since the introduction of the EMU, it had never
before gone above 2 percentage points), the President of the European Central
Bank Jean-Claude Trichet and his designated successor Mario Draghi (still leading
the Bank of Italy at the time) asked the Italian government to anticipate the aim of
a balanced budget from 2014 to 2013 and to introduce incisive specific measures
regarding growth, competition, and liberalisations15. Among these, “a thorough
review of the rules regulating the hiring and dismissal of employees should be
adopted in conjunction with the establishment of an unemployment insurance
system and a set of active labour market policies capable of easing the reallocation
of resources towards the more competitive firms and sectors”16. Moreover, it
asked the Italian government to “intervene further in the pension system, making
more stringent the eligibility criteria for seniority pensions and rapidly aligning the
retirement age of women in the private sector to that established for public
employees” (for women employed in the public sector alignment to the age of
retirement of men – beginning in 2012 – had already been introduced by the
Berlusconi government in 2010, in compliance with a ruling by the European
Court of Justice). The letter sent by Trichet and Draghi marked a turning point.
On the one hand, the agenda it imposed on the Italian government almost went as
far as to indicate the specific actions to be implemented, the policy alternatives to
be selected (Kingdon 1984); on the other hand, the letter clearly specified the
regulatory instrument to implement such actions, requiring the Italian government
to resort to an urgent decree, to be ratified by Parliament in September.
In short, while committing itself to easing the pressure on the Italian bonds by
making purchases on the secondary market, the European Central Bank imposed
certain conditions which, despite not being formalised in a memorandum as in the
On the sovereign debt crisis in Italy and on the relationship between the Berlusconi government and
the European institutions, see Jones (2012).
16 The reference to the unemployment insurance system was an implicit criticism of the response to the
crisis the government had until then adopted, namely extending short-time work schemes to prevent the
employment consequences of the crisis without reforming unemployment benefits to make them more
universal (Sacchi 2013).
case of other European countries requesting financial aid, were nonetheless
stringent and pervasive, as the ECB was setting the agenda, alternatives and policy
instruments to be adopted in exchange for its support17.
However, there is journalistic evidence that it was PM Berlusconi himself to ask
for some prodding on the part of the ECB, in order to convince his internally
divided government and majority to approve of reforms (pension reforms in
particular), while at the same time hoping to ease the very strict fiscal policy that
the Treasury Minister, Giulio Tremonti, had been following since the beginning of
the crisis18. According to such evidence, Berlusconi seeked a bank shot with the
ECB without even consulting with Tremonti (with whom a rift on economic
policy was at the time blatantly apparent)19. Even if this should be confirmed in
future research, however, such an attempt was largely ineffective and eventually
led to Berlusconi’s loss of credibility after he could not follow up on the ECB’s
prescriptions and failed to pass most of the reforms he had intended to20.
On 13th August 2011, the government introduced by decree yet another package
of emergency measures, after the one introduced only two months earlier, in July.
While the July package was introduced with the aim of balancing the budget by
2014, the August package aimed at reaching a balanced budget in 2013, as
requested by the ECB letter, through austerity measures worth 45.5 billion €
overall (20 billion € in 2012 and 25.5 billion € the following year, to be realized
mostly after the general elections envisaged in 2013). Both packages brought about
bits of retrenchment in pension provision, adding to the ones already
implemented in the two previous years. What the government could not agree
upon was a thorough reform of seniority pensions, mainly due to the opposition
of the Northern League (the bulk of seniority pensions going to workers in the
manufacturing North)21. As for the reform of individual dismissals, the
The Securities Markets Programme, introduced in 2010, was implemented to the benefit of Italy
starting in August 2011 (see Press Release, 7 August 2011 – Statement of the President of the ECB,
European Central Bank). Between 12 and 16 August 2011 the ECB purchased on the secondary market
Italian government bonds for 22 million €. At the end of 2012 the ECB held Italian government bonds
worth 102.8 billion €, out of a total of 218 billion € of bonds purchased between 2010 and 2012 through
the programme. As of September 2012 the Securities Markets Programme has been replaced by the
Outright Monetary Transactions, which differently from the former programme can be activated only
after aid has formally been requested to the European Stability Mechanism. This implies the signing of a
memorandum of understanding by the state requiring aid, the European Commission, the European
Central Bank, and “whenever possible” the International Monetary Fund. As stated by the amended
Treaty on the Functioning of the EU, the granting of any required financial assistance under the
mechanism will be made subject to strict conditionality (Art. 136).
18 In the previous years, Italy had introduced the smallest stimulus package among advanced economies,
whose fiscal balance was actually nil, as even extremely timid discretionary expenditure (amounting to 0.3
of 2008 GDP over the three-year period between 2008 and 2010) was sterilized by an increase in
revenues (Cameron 2012).
19 See S. Feltri, ‘Lettera della Bce, la vera storia’, il Fatto Quotidiano, 12 May 2012. In a television and
web talk show (Servizio Pubblico, 10 May 2012) Tremonti stated that ‘Somebody – not me – went to ask
to the Bank of Italy [Mr Draghi at the time was still heading the Bank of Italy, author’s note] that
blackmailing letter that asked for the anticipation of a balanced budget’ and later ‘I am sure the letter was
asked for’.
20 Also, the aim of a less restrictive fiscal policy to stimulate growth advocated within some governmental
quarters would seem inconsistent with the part of the letter that required the government to anticipate
the aim of a balanced budget.
21 It also disregarded completely the issue of income protection in case of unemployment, mentioned in
the ECB letter.
government exploited the opportunity to pass a provision that allows for collective
agreements at the plant or local level (‘proximity agreements’) to derogate from
national collective agreements and also from the law (including the Workers’
Statute) in various matters regarding the organization of work and production.
Collective agreements of this sort must be signed by the most representative trade
unions at the national or local level, or by their plant-level representatives. The
exact scope and import of this provision – that was issued also with the aim of
provoking a rift among the unions and between these and Confindustria, see
Sacchi (2013) – are still to be ascertained, but in principle it allows for local- or
plant-level collective agreements to derogate from the national law without
recognizing any floor of statutory rights and provisions. As regards dismissals, it
actually opened the possibility for plant-level trade-union representatives – even if
acting against the guidelines issued by peak-level unions – to sign plant-level
agreements that envisage compensation in lieu of reinstatement in case of unlawful
dismissal in larger firms, thereby circumventing the effects of article 18 of the
Workers’ Statute. While the relevance of the provision in this regard has now been
reduced by the 2012 labour market reform introduced by the Monti government,
the 2011 law is still in place and its potential consequences up for grabs.
The August policy package failed to convince the international investors, and by
early September Italy was under attack on the financial markets. In the European
Council of 22-23 October 2011 the EU institutions insistently asked Italy to make
further efforts in implementing structural reforms. Berlusconi promised new
reforms, promises met with scepticism from other EU governments and
institutions22. An informal summit of the European Council members was then
called on 26th October 2011. In the days between the two meetings Berlusconi
tried to convince the Northern League of the necessity to reform seniority
pensions, to no avail. Then, with the international reputation of the Italian
government irremediably compromised, he sent a letter to the presidents of the
European Council and of the European Commission announcing a set of reforms,
among which some regarding labour matters, to be implemented within eight
months. In particular, the Italian government committed itself to approving, within
May 2012, a “reform of labour legislation (…) functional to a greater propensity to
hiring and to the companies’ need for efficiency also through new regulations
concerning dismissal for economic reasons in open-ended labour contracts”.
The summit of the heads of state and government leaders of the Eurozone
entrusted the Commission with the task of “providing a detailed assessment of all
the measures and monitoring their implementation”, also mentioning Italy’s
commitment to “review the currently fragmented unemployment benefit system
by the end of 2011, taking into account the budgetary constraints”, which had not
been made explicit in Berlusconi’s letter. Then, the European Commission – in the
person of the European Commissioner for Economic and Monetary Affairs, Olli
At the end of the European Council on 22nd-23rd October, the President of the French Republic,
Nicolas Sarkozy, and the Chancellor of Germany, Angela Merkel, showed, in a way that was very
humiliating for Italy, that they did not believe Berlusconi and his assurances that the Italian government
would honour its commitments. The President of the European Council, Herman Van Rompuy, declared
that he had asked the Italian government for reassurance that the measures announced would actually be
Rehn – asked for clarifications on the latter point and on Italy’s commitment to
reform the labour market (as well as on several other aspects of Berlusconi’s letter,
including the pension system, for a total of 39 detailed remarks). This was done in
a letter sent to the Italian Finance Minister, Giulio Tremonti, on 4th November
2011, eliciting a response within a week. Furthermore, at the beginning of
November, members of the ECB Governing Council discussed the possibility of
stopping the purchase of Italian bonds through the Securities Markets Programme
if the Berlusconi government failed to implement the promised reforms23.
Between the end of October and the beginning of November the yield spread
between 10-year Italian and German government bonds increased by 150 basis
points (i.e. 1.5 percentage points), reaching 553 basis points on 9th November.
Tremonti replied to Rehn on 11th November, without making any commitment
regarding changes to the unemployment benefit system and once again stressing
the government’s view according to which all workers were protected through
income support measures. As for regulations concerning labour relationships,
Tremonti stated that:
“the government is prepared – after a consultation with social
partners – to intervene on dismissal (collective and individual) rules
and procedures. The aim of this reform is to substitute the current
discipline of “reintegro” (compulsory re-inclusion after a trial
judgement in favour of the worker) with monetary compensations
based on age, seniority and tenure. Such a measure could also
reduce the degree of intervention of the judicial system in the
dismissal procedures (that is at the moment a source of uncertainty
for enterprises) (…)”24.
The following day, after the budget law for 2012 was passed in Parliament,
Berlusconi resigned, followed by a technocratic government formed under the
aegis of the President of the Republic Giorgio Napolitano and led by the former
EU Commissioner Mario Monti. The three main parties in Parliament supported
the Monti government: the centre-left Democratic Party (Partito Democratico, PD),
the centrist Union of the Center (Unione di Centro, UDC) and the centre-right
People of Freedom (Popolo della Libertà, PDL), Berlusconi’s own party.
See the interview of ECB Governing Council member Yves Mersch to the Italian daily La Stampa,
where he says ‘If we observe that our interventions are undermined by the lack of effort on the part of
national governments, we have to pose ourselves the problem of incentives’, and replying to the
interviewer’s question if this meant that ECB would stop purchasing Italian bonds if the government
failed to implement promised reforms, he stated ‘If the ECB governing council reaches the conclusion
that the conditions that led it to take a decision are no longer there, it is free to change such decision at
any time. We discuss this all the time’. T. Mastrobuoni, “La BCE può smettere di comprare bond
italiani”, La Stampa, 6th November 2011.
24 Ministero dell’Economia e delle Finanze, Answers to the request for clarifications on the letter from
PM Silvio Berlusconi to the President of the European Council and the President of the European
Commission, 11th November 2011.
In his keynote speech to the Italian Senate on 17th November 2011, the appointed
Prime Minister Mario Monti spoke extensively about labour matters, in particular
about the reform of the labour market and of the income support system. Here
follow some passages from his speech which are particularly relevant in light of
what would happen next.
With the agreement of the social partners, the labour market institutions
shall have to be reformed, in order to move away from a dual
market in which some are too protected while others are completely
deprived of any protection or guarantees in case of
unemployment. (…) In any case, the new system to be designed shall be
applied to new labour relationships in order to provide truly universal
regulations, while already existing regular and stable labour relationships
shall not be modified. [Moving the focus of collective bargaining
towards the workplace] must be combined with coherent
regulations to support the unemployed aimed at facilitating their
mobility and re-entry into the labour market, overcoming the
current segmentation. (…) It is necessary to fill the wide gap that
has been created between the guarantees and advantages offered by
the use of fixed-term contracts and of open-ended contracts,
overcoming the risks and uncertainties that prevent companies from
using the latter. While taking budget restraints into account, a
systematic reform of “social shock absorbers” must be initiated, in
order to ensure that no workers will be left without protection
against the risk of temporarily losing their jobs. We have a crisis to
deal with, we have structural transformations to deal with, but it is
our duty to try and avoid any distress associated with these
processes. (Italics added)
In the same speech, Monti also addressed the issue of pensions, stating that:
In recent years, the social security legislation has been the subject of
repeated interventions, which have led the Italian pension system to
be among the most sustainable in Europe and among those better
prepared to deal with any adverse shocks. Already, the retirement
age in case of old age (…) is higher than that of workers in
Germany and France.
Yet, our pensions system remains characterised by wide disparities
in treatment across different generations and categories of workers,
as well as by unjustified privileged areas.
Monti expressed himself in terms of inter-generational and horizontal equality to
meet the demands repeatedly made by EU institutions in the previous six months,
especially for what concerned potential expenditure reductions to be achieved. As
mentioned above, seniority pensions had been a burning issue throughout the last
months of the Berlusconi government, but the Northern League had strenuously
opposed any intervention in the matter. Hence, in his letter to the Presidents of
the European Commission and of the European Council on 26th October 2011,
Berlusconi could do nothing more than mention Italy’s success in reforming its
pension system and in making it financially sustainable, increasing the retirement
age for old-age pensions to a threshold higher than that of many of its European
partners (these remarks would later be used by Monti in his keynote speech). The
government committed itself to setting the retirement age at 67 for all citizens
(both men and women, in both the public and private sector) by 2026, but it did
not mention any new actions concerning seniority pensions besides the measures
already adopted. Olli Rehn’s letter to Tremonti was rather fastidious and put
forward the idea of a quicker transition for women employed in the private sector
as well as the abolition of seniority pensions. In his answer, Tremonti explained
that the mechanism for the automatic increase of the retirement age (including
eligibility for non-contributory social allowances), based on increasing life
expectancy and introduced by the reforms of the Berlusconi government between
2009 and 2011, would lead Italy to meet the set targets. Moreover, he underlined
that, thanks to this mechanism, the eligibility criteria for seniority pensions would
become more stringent in Italy than, for instance, in Germany.
The pressure exerted by the Community institutions to deal with this issue forced
the new government led by Monti to take action immediately. The matter of
pensions had to be addressed at once in order to reduce spending in the short and
medium term – through measures justifiable on the basis of greater fairness of the
system, as seen above – and to send a “signal” to the European institutions, the
other member states, as well as the financial markets. Indeed, the reform allowed
the Monti government to acquire a reputation for being tough both in tackling the
problems not dealt with by the previous governments (especially the last one,
deadlocked precisely on the matter of seniority pensions) and in showing blatant
disregard for the trade unions, perceived and portrayed as forces for the
preservation of the status quo and partly responsible for the country’s dramatic
It is beyond the scope of this paper to provide an in-depth analysis of the pension
reform, introduced in December 2011 (within the so-called Decreto Salva Italia,
“Italy-saver” Decree, a budget package that included an array of interventions
worth 30 billion €, 3% of the GDP, made of 13 billion € in cuts and 17 billion € in
new taxes). Hence, the description below will focus on its most important
measures only. The reform followed on from the measures adopted by the
previous government and included the immediate implementation of a system for
automatic retirement age increase based on increased life expectancy. At the same
time, the Fornero pension reform equalised the retirement age for women
employed in the private sector to that of the other categories (this measure will be
fully phased in by 2018) and set a minimum retirement age of 67 for all citizens
starting from 2021 (this might be increased on the basis of the automatic
mechanism for its indexing to life expectancy; based on the available demographic
scenarios, the estimate for 2050 is around 70 years of age). Furthermore, the “prorata temporis” contribution-related method of calculating pensions was extended
to workers who were previously entirely under the earnings-related regime25. This
The Dini reform of 1995 identified three categories of workers. The new and less generous notional
defined contribution system would be applied in full only to those entering the labour market for the first
time after 1st January 1996; it would be applied “pro rata temporis” only to the contribution periods after
1st January 1996 in the case of workers with less than 18 years’ contributions as of 31st December 1995; it
would not be applied to workers with at least 18 years’ contributions as of 31st December 1995, who
would thus remain completely under the previous earnings-related regime.
was done by applying for these workers the notional defined contribution system
introduced by the 1995 Dini reform to all contribution periods they accrue after 1st
January 2012. Also, indexing to inflation was suspended for 2012 and 2013 for all
pensions above Euro 1,400 gross per month. All these measures regarded the
pension framework as a whole. Further measures were introduced in relation to
old-age pensions26, but the biggest and most incisive changes concerned seniority
pensions, which were abolished and replaced by early-drawn pensions, following
the rules below. A flexible retirement age was re-introduced for workers entirely
under the notional defined contribution regime; this had been possible under the
Dini reform but was later abolished by the Maroni reform of 200427. As for all the
other workers, the conditions of retirement through early-drawn pensions were
made more stringent with immediate effect.
The pension reform, drafted and implemented in two weeks, affected the reform
of the labour market – the subject of this article – in three main ways. The first
aspect concerned the government’s decision-making attitude. The implementation of
a pension reform was facilitated by exogenous conditions that were undoubdtedly
extremely favourable. These included the dramatic situation of Italy’s sovereign
debt and the fact that the previous government had lost international credibility. A
key role was also played by the pressing requests made by the EU institutions and
by the international financial institutions, which called for immediate, albeit
extremely unpopular, measures within a context in which the political parties
appeared stunned and unable to act (but were obviously glad that a government
explicitly presented as made up of technocrats would take the blame for such
decisions). At the same time, unlike the case of the future labour reform, Minister
Fornero’s expertise in financial aspects of the pension system was undisputed and
her appointment was immediately perceived as an expression of the government’s
will to address the matter, after months of political deadlock in relation to the
reform of seniority pensions28. Relying on the fact that Italy was in an emergency
situation as well as on the general acknowledgement of its technical expertise,
driven by the will to innovate and save Italy from material and moral disaster after
years of mismanagement and inability to take decisions, the Monti government
implemented the pension reform unilaterally, without negotiating with the social
partners but merely informing them of the decisions taken. Unlike what had
happened during the emergency governments of the 1990s (those led by Amato,
Ciampi and Dini), the social partners were no longer precious allies. Counting on
the parties’ support in Parliament and on the endorsement of supranational
institutions and other European governments which feared financial contagion,
Workers will be allowed to postpone their retirement until 70 years of age. At the same time, retiring
before the age of 70 is possible only with an old-age pension equal to at least 1.5 times the amount of the
non-contributory social allowance (a means-tested pensions for those in need). Moreover, the minimum
full contribution period to be eligible for pension under the notional defined contribution regime has
been extended from 5 to 20 years (which might correspond to a much longer period in the case of nonstandard workers, see Berton et al, 2012).
27 The new time interval for retirement will be between 63 and 70 years of age; drawing an early pension
will be possible only with a pension equal to at least 2.8 times the non-contributory social allowance.
28 A professor of economics at the University of Turin, Ms Fornero is a well-known expert on the Italian
pension system, and before joining the government had long advocated for its overhaul according to
principles of actuarial neutrality and fairness.
the Monti government found its source of legitimacy elsewhere. Indeed,
dissatisfying the social partners, and above all the trade unions, was instrumental
in strengthening the government’s reputation in the international political and
financial arenas and possibly to acquire legitimacy domestically through
Thatcherite postures.
The relative ease with which the government was able to implement its pension
reform within a sort of political vacuum boosted its confidence and persuaded
Monti and his government that it might be possible to extend their decisionmaking attitude to the labour policy sector as well. This was a sector where the
chances of legitimising reforms on the basis of financial considerations were
virtually non-existent, so it was necessary for the government to put forward
weaker and more generic reasons, related to economic growth and fairness. Also,
the government was aware of its limited technical expertise, and the role of the
social partners was initially acknowledged by the Prime Minister. The pension
reform made the government confident in its political means and in its ability to
openly challenge the trade unions, seen not as organisations able to endorse
policymaking actions based on awareness of macroeconomic constraints but as
mere distributional coalitions, bent on rent seeking.
At the same time, the trade unions suffered a major defeat. From this point of
view, the lessons in strategy learnt by the government made it more confident,
while the opposite happened to the trade unions. The second aspect of the
pension reform that affected the labour market reform was the trade unions’
awareness that another debacle was certainly possible and that it was best to try and
limit the damage, since any other behaviour would once again lead the government
to take unilateral measures.
The third aspect of the pension reform, which became increasingly relevant as
time passed and which would affect the parliamentary process for the enactment
of the labour reform, regarded the matter of the so-called esodati (“those in
excess”). These were workers who would have met the pension eligibility criteria
while drawing the mobility allowance or had left work voluntarily on the basis of
company agreements within the framework of the pre-reform pension legislation
(or would leave work in the future because of irrevocable agreements made in the
past) and who saw, with the approval of the pension reform, the date of their
retirement postponed to a much later date (up to ten years later, in some cases).
During the press conference to present the so-called “Italy-saver” Decree on 4th
December 2011, in one of the most emotionally charged moments in Italy’s recent
political history, Monti introduced the new pension measures and stated once
again that its government now wanted to tackle the reform of labour and out-ofwork income maintenance and support. This, Monti said, would be done by
distinguishing between “the fields in which citizens are mainly the recipients of
measures, hence fields which fall under the jurisdiction of public powers,
government and parliament [such as the pension field – author’s note], and the
fields, particularly that of the labour market, in which negotiating with the social
partners is essential” (our transcription).
The negotiations began in January 2012, following a brief debate shortly before
Christmas fuelled by an interview in the newspaper “Corriere della Sera” in which
Minister Fornero stated that, as far as Article 18 was concerned, “there are no
totems” and invited the trade unions to “initiate intellectually honest and open
discussions”29. She then toned down her statements during the television
programme “Porta a Porta”: “Do we want to leave Article 18 alone then? I am
willing to say I don’t even know it. I have never seen it. There’s so much to do
about the labour market before we get to it”30. If the trade unions thought this
would make their life easier and allow them to make up for what had been lost in
the negotiations on the pension reform, they were grossly mistaken. Rather than
the negotiation tables, Minister Fornero seemed to have academic seminars in
mind, where a topic is put forward, comments and criticism are made, and then
the researcher decides whether to incorporate them into the final research paper.
Much to the annoyance of the social partners, when taking part in technical
meetings the Minister and her collaborators read notes which were not circulated
to the participants. In general, the Minister and the government did not do much
to hide the fact that they thought the social partners should share the blame for
the country’s dramatic situation, due to their repeated vetoes and their actions
aimed at taking advantage of positional rents. Hence, the trade unions had the
right to participate, of course, but not to impede.
This phase is difficult to reconstruct and to explain in brief, since several key
issues were brought into play and each party wanted to provide its version of the
story, like in a gigantic Rashomon. Furthermore, the public statements made by
the actors involved to communicate with their extended membership base did not
necessarily correspond to their actual posture during the negotiations, following
the well-known dichotomy between the logic of membership and the logic of
To sum up, the negotiations revolved around three main issues: a) the regulation
of non-standard contracts and “bogus” self-employment, that is, self-employment
relationships disguising dependent employment relationships, more regulated and
costlier for the employer (henceforth: non-standard work); b) the regulation of
individual dismissals of open-ended workers, especially for economic motives; c)
out-of-work income maintenance and support (henceforth: income support)32.
The Minister’s early attempt to discuss an organic reform – addressing the three
29 E. Marro, Fornero: «Sull’articolo 18 non ci sono totem. E dico sì al contratto unico», Corriere della
Sera, 18th Dec. 2011.
30 Porta a Porta, Rai Uno, 20th Dec. 2011.
31 It should be reminded that the Minister instructed her collaborators not to reveal any information
about the decision-making process driving the reform. Due to recent and tragic events in Italy’s labour
policymaking history (the killings of two labour lawyers and governmental advisers in previous years:
Massimo D’Antona in 1997 and Marco Biagi in 2002), this was done to protect those involved in
designing the reform, but it obviously creates major problems to anyone doing research on the matter.
32 The reform also touched upon the issue of active labour market policies and conditionality of
income support measures based on the worker’s willingness to be trained and accept job offers.
However, these aspects will not be addressed here. Similarly, this paper will not deal with the key issue of
revising labour litigation procedures, nor will it analyse changes made to the procedures for collective
aspects above based on a proposal by the government to which the social partners
were supposed to respond – was rejected by the social partners, which asked for
some time to formulate a common counterproposal. This was not possible
because of disagreements among the trade unions and due to the growing
differences between the association of Italian industries (Confindustria) and the
coordinating body of small handicraft and service enterprises (Rete Imprese)33.
This rift caused Confindustria to move away from the common bloc initially
created with the trade unions, which shows that entrepreneurial interests cannot
be automatically assumed as being homogeneous, a result coherent with the wellestablished conclusions found in the comparative political economy literature34.
After briefly contemplating ideas coming from the academic debate, the Minister
removed the topic of dismissal regulation from the technical discussion, probably
to avoid its potential negative impact on the outcome of the negotiation. The issue
was nevertheless addressed, most likely in bilateral meetings between the
government and the social partners, along with the latter’s proposal to limit the
role of judges in order to increase the area of influence of collective bargaining35.
However, this separation caused problems to the negotiation on non-standard
work and income support, since the trade-off among the various dimensions at
play was not immediately clear to all the actors involved. This contributed to
reducing mutual trust, especially for what concerned small enterprises, afraid that a
package deal involving restrictions on non-standard work and more costly income
support in exchange for easier dismissals – a matter which did not concern them
closely – would have only negative repercussions on them.
After removing the issue of individual dismissals from the technical discussion, the
Minister proposed to simplify the income support system to include two schemes
only: a new form of unemployment insurance called Assicurazione sociale per l’impiego
(Social Insurance for Employment, ASPI), and the already existing conjunctural
short-time scheme CIGO, while the structural short-time scheme CIGS would be
eliminated. The strong opposition of the social partners (especially Confindustria)
to the abolition of the CIGS caused a fierce debate and eventually led the Minister
to put off any discussions on the matter.
It should be underlined that the Minister and her collaborators believed the
differences among the various income support measures to be tools for the
preservation of positional rents and the whole income support system to be
fragmented and lacking in completeness, coherently with the remarks put forward
by the European institutions and the empirical evidence illustrated above. Hence,
they intended to move towards a more inclusive and homogeneous system. It is
therefore easy to understand why, after the social partners’ refusal to abolish the
structural short-time scheme, the Minister tried to extend such scheme to all types
of enterprises. In this case, the proposal was opposed by bank and insurance
33 Rete Imprese, established in 2010, is the unified body which represents the five largest employers’
associations of non-farming small and medium enterprises (Confcommercio, Confartigianato,
Confederazione Nazionale Artigianato, Casartigiani, and Confesercenti).
34 See, among others, Mares (2003).
35 One of the proposals made by the trade union CISL aimed at including individual dismissal for
economic reasons under the procedures for collective dismissal, which involve a trade union assessment,
and at modifying Article 18 so that the appointed judge would be able to decide between reinstatement
and monetary compensation.
companies, which already had in place autonomously bargained funds and had no
intention to enter into new ones which they would not use36. A solution was
found by introducing the obligation for all companies with more than 15
employees to join a bipartite solidarity fund, or a residual fund managed by the
National Social Security Institute (INPS)37.
All in all, in the field of income support the initial governmental proposals to be
retained were the phasing out of the mobility allowance by 2017, and the
introduction of the ASPI (see below).
As for non-standard work, the Minister and her collaborators wanted to draw a
clear distinction between “virtuous flexibility” and “predatory flexibility”, the latter
essentially being aimed at taking advantage of cost reductions by using nonstandard contracts. Although this view has a solid empirical basis both in Italy and
abroad (Berton et al 2012), the way in which the problem was presented and the
answers provided were perceived as excessively damaging for Italian enterprises
(especially by Rete Imprese, some portions of Berlusconi’s party PDL, and later
also by Confindustria). They were seen as marked by an overly legally-oriented
framework, aimed at controlling any possible behaviour through legal regulations
instead of providing a set of incentives and disincentives and then leaving the
economic operators free to act. The measures proposed in relation to entry
flexibility concerned in particular: the minimum period which must elapse between
the expiry of a fixed-term contract and the establishment of a new one38; the
introduction of a minimum share of apprentice contracts the employer must
convert into open-ended contracts (at least 50% in the last three years) in order to
continue using apprentice contracts; the identification of presumptive criteria to
distinguish independent contractors and the real self-employed from employment
relationships disguised as the former (“bogus self-employment”); a crackdown on
other forms of employment possibly disguising exploitation of workers; within six
years, the assimilation of contribution rates between independent contractors and
dependent workers. The government’s proposals were then modified to varying
degrees in parliament (see below).
A distinguishing feature of the government’s proposal concerned how the new
insurance against unemployment would be financed. The proposal did not
introduce a fully-fledged experience rating mechanism (whereby part of the
contributions paid by the company is determined on the basis of past behaviour,
i.e. dismissals, contracts not renewed or not converted into fixed-term contracts),
but it was established that employers would pay an extra 1.4% contribution on
fixed-term labour (excluding seasonal workers, those replacing absent workers,
apprentices, and fixed-term workers in the public sector). A portion of the extra
contribution paid could then be recovered if the labour relationships were
36 Some extensions of the CIGS, until then renewed year by year in the budget laws, were formalised.
These included retail companies and travel agencies with more than 50 employees.
37 The most relevant difference between these “solidarity” funds, which must break even, and the
standard short-time work fund is that in the former the notional social contributions for hours not
worked are paid by the fund itself, whereas in the latter the notional contributions are taken over by
INPS, and then translated to the taxpayer through general taxation, which makes it very advantageous for
Italian employers to use CIGS or CIGO. For a comparative analysis of the matter, see Sacchi et al (2011).
38 The period was increased from 10 days (for contracts shorter than 6 months) or 20 days (for
contracts longer than 6 months) to 60 or 90 days respectively.
converted into open-ended contracts. Conversely, a penalty was introduced for
employers dismissing workers with open-ended contracts (or terminating
apprentice contracts upon their expiry, without converting them into open-ended
As for individual dismissals, a compromise was within reach in mid March. The
key idea was that judges would no longer be obliged to reinstate workers in case of
dismissal for economic reasons deemed unjustified but would be given
discretionary authority on the matter39. Regardless of statements given for tactical
reasons40, this stance was shared by the main trade unions, although some
differences remained. The differences concerned mainly protection against
illegitimate dismissal for disciplinary reasons (or low productivity). The CGIL
insisted on retaining the regulation by which workers could choose between
reinstatement and compensation, and was supported in this by the UIL.
Conversely, hoping to close the negotiation without losses on the front of
dismissal for economic reasons and fearing that intransigence on disciplinary
dismissals could jeopardize this goal, the CISL was willing to accept the
government’s proposal to let judges discriminate between cases of unfair
disciplinary dismissal subject to reintegration and those merely sanctionable
through monetary compensation, on the basis of a categorization introduced by
the reform itself41.
A few days later, on 20th March, there was a breach in the negotiations. In a
meeting between the government and the social partners, the Prime Minister put a
spurt on and asked the latter to declare without further hesitation whether they
agreed with the proposal made by the government. Monti tried to speed up the
process because he was about to leave for the Far East and was due to meet
potential investors in Italian debt securities at a road show in China, which was
seen as a crucial opportunity for Italy’s future financial viability. The proposal
provided for maintaining reintegration in the case of dismissal declared
discriminatory, the reconfiguration according to the guidelines above
(categorization of cases in which the judge can order reintegration or must
establish compensation) of the consequences of disciplinary dismissal deemed
illegitimate, and the abolition of reintegration in cases of dismissal for economic
reasons that are declared illegitimate, establishing that the court can only prescribe
39 This was talked about by the social partners and the media as “the German model”, disregarding
the automatic provision of severance payment in the German system. In Germany severance payment is
equal to half a month’s salary for each year worked in the company, a sum that workers can refuse and
decide to start legal proceedings to question the lawfulness of the dismissal.
40 For instance, during a debate among the social partners that took place at a Confindustria
convention in Milan on 17th-18th March 2012, the CGIL’s general secretary, Susanna Camusso, demanded
that Article 18 be extended to companies with fewer than 15 employees, much to the surprise of the
audience. This was done for obvious tactical reasons within the negotiation and to send a message to the
more radical wing of the trade union that had challenged Camusso’s mandate to negotiate with the
government on the matter of dismissals.
41 If the accusations made against the worker are ungrounded or when collective contracts provide
for the worker’s behaviour to be punished with a minor penalty, the judge shall rule in favour of
reinstatement; in other cases of proven illegitimate subjective or disciplinary dismissal, the judge shall
order the employer to pay monetary compensation for an amount equal to between (this was the
government’s proposal) 15 and 27 monthly salaries. If the judge orders the worker to be reinstated, the
foregone wages the employer shall pay the unlawfully dismissed worker is capped to 12 monthly salaries,
but no ceiling is set for social contributions due.
a monetary compensation (unless the employee is able to prove that the real
motives of the dismissal were discriminatory or disciplinary, rather than merely
economic42). It also arranged a mandatory, preventative conciliation process (in
which the employee may be assisted by trade union representatives) in the event
that the employer intends to fire for economic reasons, primarily aimed at bringing
out monetary compensation for dismissal through negotiation before this
happens43. All the social partners, except the CGIL, agreed to the government’s
reform proposal and that very evening Minister Fornero illustrated the content on
the reform in a press conference held at Palazzo Chigi, while Monti declared that
“for the government the matter is settled”. On 21st March, the social partners were
summoned to be informed about the details of the reform and, on 23rd March,
two days before Monti was due to leave for the Far East, the Council of Ministers
approved a 26-page policy paper outlining the principles of the reform. Due to the
moral suasion put into action by the President of the Republic, Giorgio
Napolitano, the reform was introduced not as a decree (as all the other structural
reforms of the Monti government) but as a bill, so that it could be modified in
Parliament (a choice not welcomed by the PDL). Indeed, the paper approved by
the Council of Ministers bore the writing “save further agreements”, thus making
it possible to change the actual articles of the reform bill before it was presented to
the Senate (and for two weeks the only official document from the government
was the policy paper, which bore no legal drafting).
In the days following Monti and Fornero’s press conference of 20th March, strong
opposition to the reform emerged both in the political environment and among
the trade unions. On 21st March, during the television programme “Porta a Porta”,
the secretary of the Democratic Party (PD), Pierluigi Bersani, admonished Monti
and, when answering a question asked by the host Bruno Vespa, said: “Do you
think President Monti can tell us to ‘take it or leave it’? (…) I don’t expect
President Monti to tell us to ‘take it or leave it’, because clearly we’ll vote when we
are convinced. (…) I start from the assumption that, on a matter such as this, you
can’t say ‘take it or leave it’”. After the general strike immediately called by the
CGIL (however, without setting a date, in order to leave room for further
negotiations), the PD – historically close to CGIL – was now in a very difficult
position. The risk was that the wrench made by the Prime Minister would cause an
internal rift within the PD, with serious repercussions on the support needed by
the government, as clearly explained by the PD’s vice secretary Enrico Letta in an
42 Hence, the burden of proof was placed upon the worker. The amount and rules concerning
monetary compensation were those of disciplinary dismissal, see the footnote above.
43 Presumably, involvement of their representatives in the conciliation procedure contributed to
generating consensus around the reform among the trade unions (the CGIL showed its appreciation in a
note issued by the secretariat on 5th April), which saw it as a means to increase their membership and to
exert their influence in the procedures for individual dismissal.
interview with the Financial Times44. Indeed, the reform was being opposed not
only by the CGIL but also by the rank and file of the other trade unions. The
higher echelons of the CISL and the UIL had to face tough opposition at the local
level, especially in the north of Italy and among metalworkers (a CGIL-CISL-UIL
joint strike took place in Bologna, the CISL regional secretary in Milan spoke
against the agreement, and the national metalworker federation within the UIL
took an extremely radical stand and acted autonomously by calling a 4-hour
national strike). Even the small rightist union UGL withdrew its support to the
reform, which it had granted two days earlier.
For its part, Confindustria believed that it had made many concessions – especially
in terms of increased costs – for what concerned non-standard work and warned
the government against modifying the measures on dismissals. Similarly, in a
confidential note on Italy’s financial situation prepared for the Eurogroup meeting
to be held in Copenhagen on 30th March, the European Commission gave a
positive assessment of the reform but urged the government not to water it down:
The Commission has been closely following the debate between the
government and the social partners on the content of labour market
reform…. The momentum of reform must be maintained. The
responsibility for a quick adoption of an effective reform now rests
with the parliament. While it is very positive that the draft reform
proposal by the government builds on a constructive dialogue with
the social partners, it is crucial that the objective and degree of
ambition of the reform remain commensurate to the challenges of
the Italian labour market, in line with the Council
These were the official stances but, during Monti’s trip to the Far East, the various
parties involved tried to come to an understanding, strongly endorsed by the
President of the Republic. The government itself was not all of one mind about
the matter at hand and the initial position – that of the Prime Minister and of the
Treasury –, not wholly against the idea of going head-to-head with the trade
unions to gain a stronger reputation on the international markets, was softening.
At the same time, the CGIL showed its willingness to reach an agreement which
would allow it to prove to its membership that opposing the government’s
proposal was paying off and Confindustria was also working towards finding
common ground. After a phase of negotiation – or rather, simple consultation –
with the social partners in January-March, followed by a phase of unilateral action
undertaken by the government around the period of 20th March, Monti’s return
from China was followed by a long exercise in symbolic politics, which allowed
the various parties involved to reach a final agreement amidst great political and
union tension and major international pressures as well as the common wish to
reach a solution. It was the leader of the organisation which stood to lose the
most from not coming to an agreement, the secretary of the PD Bersani, who
44 “If the PD collapses it will also be the collapse of the Monti government. (…) For this strange
experiment [with a technocratic government] to work, the PD must remain a pillar of unity”. G. Dinmore
and R. Sanderson, Monti faces tough test with labour reforms, 21st March 2012, Financial Times.
45 P. Spiegel, More leaked warnings, this time for Italy, Brussels Blog, Financial Times, 2nd April 2012.
orchestrated the devising of a “satisficing” solution in a long meeting with Monti a
few hours after his return to Italy. He then managed to call an emergency nighttime meeting with the participation of the Prime Minister and Minister Fornero on
the one hand, and the secretaries of the three parties making up the parliament
majority supporting Monti’s government, on the other. This summit led to a
political agreement on dismissal for economic reasons, which gave judges power
to order the reinstatement of workers in case of proven “manifest non-existence”
of the alleged grounds for dismissal. Furthermore, workers may ask judges to
ascertain whether the dismissal was actually due to discriminatory or disciplinary
reasons but have no longer to bear the burden of proving the existence of such
underlying reasons themselves. On the other hand, compared to the original
proposal the amount of monetary compensation due was reduced (from between
15 and 27 to between 12 and 24 monthly salaries), while the rule about the ceiling
of 12 unpaid monthly salaries in case of reinstatement was retained. Moreover, the
PDL, which was dissatisfied with the provisions included in the reform about
non-standard work, deemed unfair towards enterprises, obtained some delays in
the introduction of the new regulations46.
Thanks to the agreement reached in this political summit, the parties managed to
remove the labour reform from the front pages of Italian newspapers before
starting the campaign for the local elections to be held in May. The bill signed by
Minister Fornero was introduced to the Senate on 5th April. Overall, the
compromise reached on changes to be made to Article 18 satisfied the PDL and
some limited dissension emerging within the party during the parliamentary
process was kept at bay by the PDL group leaders and, when necessary, by
Berlusconi himself. Above all, the compromise got the PD out of a tight spot. In a
note issued by its national secretariat on 5th April, the CGIL described the
reinstatement of workers in case of manifest non-existence of valid grounds for
dismissal as “a positive result which restores a principle of legal civilisation”, an
evaluation confirmed by the national managing committee which, on 19th April,
approved the document of the national secretariat with 90 votes in favour, 35
against, and 6 abstained.
Major criticism to the bill being discussed in the Senate came from Confindustria,
although some of its top officers had allegedly played an active role in reaching the
agreement. Its President, Emma Marcegaglia, gave an interview to the Financial
Times in which she expressed her great disappointment with the reform, saying
that the text was “very bad” and “not what we agreed” and going as far as to
declare that it would have been better “to have nothing, or change it in
parliament”, concluding that “this labour market reform is not what the country
needed”47. These statements, which triggered Monti’s angry reaction, were at least
46 However, in comparison to the document dated 23rd March, the possibility given to the employers
of stipulating the first fixed-term contract (or the first assignment in a temp agency work contract)
without providing any motivation (per se a novelty in Italy’s labour law) was made more limited. The
document approved by the Council of Ministers had seemed to ensure that this tool would be available to
employers for the entire duration of fixed-term contracts (36 months) but the bill imposed a maximum
limit of 6 months.
47 G. Dinmore, “Employers attack Italy’s labour reforms”, Financial Times, 5th April 2012.
partially given to appeal to Confindustria’s membership but contributed to making
the international financial press sceptical about the reform.48
All the political forces, as well as the trade unions, knew that the discussion in
parliament could lead to some changes being made with regard to non-standard
work and income support, and that various types of pressure groups would find an
access point to exert their influence in parliament much more so than they had
been able to do in the previous phases. Yet, they knew also that the general
framework of the reform had to be preserved and, above all, the compromise
reached on individual dismissal regulations could not be challenged. All the actors
were aware of the fact that, by showing that such an agreement could be reached,
a clear message was being sent to the European institutions, the other member
states, and international organisations. None of the parties involved had any
interest in investing resources to promote further changes.
Parliamentary work proceeded quite smoothly in the Senate under the joint
supervision of the two rapporteurs, Maurizio Castro (PDL) and the former
minister Tiziano Treu (PD). The development of parliamentary work was
constantly monitored by EU and international institutions, which had regular
contacts with the decision-makers involved. Several modifications were
introduced, especially in support of small enterprises and handicraft firms (but a
minimum level of pay for independent contractors was also provided for), several
pressure groups tried to make their voice heard, and there were some moments of
tension which slowed down the parliamentary process, but the reform was finally
approved in Senate on 31st May, after the government called for a motion of
The discussion of the bill in the Chamber of Deputies was expected to be
bumpier. The text approved by the Senate was presented on 4th June by the
rapporteurs Giuliano Cazzola (PDL) and Cesare Damiano (PD), and a long series
of demands and pressures of various kinds soon began to pile up. Above all,
however, the labour reform came to be inextricably linked to the thorny matter of
the so-called “esodati”. As a consequence of the retirement age being increased by
the pension reform, the reform of income support and the phasing out of the
mobility allowance in particular (due to be completely abolished in 2017) create
48 The about-turn of the Wall Street Journal was particularly remarkable. In an editorial published at
the end of March (which actually contained factual inaccuracies), the newspaper compared Monti to
Margaret Thatcher but, after the agreement of 3rd April, it put forward a very different opinion, this time
likening Monti to Edward Heath; see “Monti Pulls a Thatcher”, editorial, Wall Street Journal, 27th March
2012; “Surrender, Italian Style”, editorial, Wall Street Journal, 6th April 2012.
49 The main changes introduced in the Senate with regard to contracts concerned: duration of fixedterm contracts (or first assignments in temporary agency work) stipulated without motivation extended to
12 months; under certain conditions, possibility of reducing, through collective bargaining, the periods
elapsing between two successive fixed-term contracts; businesses with fewer than 10 employees excluded
from the obligation to turn 50% of apprentice contracts into open-ended contracts in order to be able to
continue hiring with apprentice contracts; provision of minimum payments to independent contractors,
determined on the basis of the minimum salary set by collective contracts for similar positions held by
employees; less stringent rules to distinguish real freelance workers from those forced to work as
freelancers. Furthermore, for what concerned the setting up of compulsory bipartite funds for firms with
more than 15 employees without salary integration, the specific features of the handicraft sector were
acknowledged. In fact, the handicraft sector is characterised by the widespread use of bilateral funds,
grouping together firms of various sizes. Said funds could simply adjust their objectives to those of the
reform and thus continue to exist alongside the general organisational model envisaged by the reform.
serious objective problems in income maintenance for a group of citizens who,
due to their age, have very slim chances of being re-employed. The estimate of
their number soon turned into a matter for national debate and spurred, among
other effects, a major dispute between the top managers at INPS and Minister
Fornero. At first, it was estimated that 65,000 citizens in total would be affected by
the consequences of the pension reform and financial coverage for their
retirement according to the pre-existing rules had already been ensured within the
framework of the reform itself (the coverage was then activated in early June 2012
through a joint decree signed by the Treasury and Labour Ministers). However, a
hearing by the Director General of INPS before the Chamber of Deputies in April
contributed to bringing the matter of the “esodati” into the limelight. In his
hearing, he stated that the number of citizens potentially affected was estimated at
around 130,000, but this figure could rise in case of different hypotheses being
made. The issue became increasingly important also because – willingly or not –
government communication had not clarified the difference between the estimated
number of those potentially affected by the problem and the actual share of
potential policy takers, i.e. the beneficiaries of government actions identified on
the basis of the more or less stringent classification adopted by the government.
The matter continued to steer debate in the month of May until the issuing, at the
beginning of June, of the decree ensuring financial coverage for the 65,000
individuals to be “safeguarded” by the reform, as mentioned above. However,
while the labour reform was being discussed in the Chamber of Deputies, on 11th
June the news agency ANSA released a confidential report requested by Minister
Fornero to INPS and entered into INPS’s register of outgoing documents before
the issuing of the inter-ministerial decree. The document put the number of
workers potentially affected by the problem at around 390,000. Based on the
report provided by INPS, the government and the State General Accounting
Department within the Treasury had defined the eligibility criteria for the
safeguarding of workers and reduced their total number to 65,000. The circulation
of the report made the general public aware of the fact that the government had
been fully informed about the extent of the problem but had chosen to adopt an
ambiguous, to say the least, communication strategy. This caused great political
strain, with major repercussions on the parliamentary debate on the labour reform.
In particular, the PD parliamentary group in the Chamber of Deputies, under the
influence of the rapporteur Damiano, proposed to delay the implementation of
the reform provisions concerning the introduction of the ASPI, so that the
phasing out of the mobility allowance would be delayed. Their aim was to
postpone any final decision until after the 2013 elections when, with a Labour
Minister at the time envisaged to come from the center-left camp, it would
become easier to revise the framework of the income support reform – provided
of course that it had not yet become operational. Minister Fornero fiercely
opposed any changes that would radically alter the reform, depriving it of one of
its fundamental pillars as the revision of unemployment insurance. Meanwhile,
tension was mounting also within the PDL, and its group leaders knew that a
unanimous vote by all PDL MPs in favour of the reform could be achieved only
with great effort and hard work.
In conclusion, despite building on the bipartisan work carried out in the Senate,
the passage of the reform through the Chamber of Deputies proved to be very
bumpy indeed – especially due to exogenous events, among which its interaction
with the “esodati” issue for the PD and internal tensions within the PDL – and its
outcome remained uncertain, especially for what concerned the time required for
its approval. As already seen around 20th March when Monti left for China, the
approval of the reform was influenced by another exogenous circumstance which
worked as “external constraint”, i.e. the European Council planned for 28th-29th
May. This summit was extremely important for Italy, since it was due to tackle the
key features of the intervention tool exploiting the European Financial Stability
Facility and the European Stability Mechanism to relieve pressure on the members
states’ sovereign debt by making purchases on the secondary market and by
concurrently sterilising the monetary base. This would later evolve in the ECB
Outright Monetary Transaction programme, while in Italy it became commonly
known as the “anti-spread shield”. To secure any favorable result for Italy, Monti
would have had to arrive in Brussels with the viaticum of a labor reform deal
approved by the original date promised during the Berlusconi government, in
autumn 2011. The government therefore put a confidence vote in the Chamber of
Deputies, pledging to implement certain amendments agreed with the rapporteurs,
in particular on non-standard work, mobility allowance, and social contributions
for the independent contractors, while enacting one decree, and to provide
additional solutions for the esodati problem in another decree. Law no. 92/2012
to reform the labor market was thus passed by the Chamber of Deputies on 27
June and signed by the President of the Republic the next day, with the unanimous
approval of the EU, international institutions, and ratings agencies50.
Consistently with the commitment made, the government integrated into the law
converting the so-called decree on Development, approved in August, the
previously agreed modifications51. With regard to the “esodati”, the government
outlined coverage of some 55,000 individuals in a July 2012 decree (so-called
decree on the Spending Review), as well as 10,000 others in the Budget law for
2013, bringing the total number of those “safeguarded” to 120,000, vis-à-vis a
total number of 315,000 “esodati” as officially estimated by the State General
Accounting Department. Furthermore, the clause included in the labour reform by
the law converting the decree on Development provides for an assessment in 2014
In autumn 2012 a petition was made to call a referendum for the abolition of the provisions
concerning Article 18 included in the Fornero reform and of Article 8 of Law 148 of 2011. The gathering
of signatures was promoted by various parties on the left, i.e. SEL, IDV, PDCI, PRC, and the Green
Party, as well as by the metalworking federation within the CGIL, FIOM, and some portions of the
CGIL itself. However, the dissolution of parliament in 2012 made the signatures gathered unusable.
51 The law converting the decree introduced the following changes to the labour reform law: the shorter
minimum periods between fixed-term contracts would be extended to seasonal workers and to all the
cases provided for in collective contracts; the presumptive economic criteria for the classification of real
freelance workers would be made even less strict; the 2013 mobility allowance rules would be extended
until the end of 2014, but then there would be a leap forward to comply with the schedule set by the law
for 2015; by October 2014, the Labour Minister and the social partners would assess the progress of the
reform in relation to the temporary measures concerning the mobility allowance, introducing changes if
deemed necessary; the increase in contribution rates paid into INPS’s separate management by those not
registered with any other fund would be postponed, while the contributions paid by those also registered
with other funds would increase faster.
of transitional rules of the mobility allowance, thus potentially allowing a fast track
for the reversal of the latter’s abolition. It is therefore clear that the question of the
“esodati” was left open in the end, and destined to be on the agenda of the next
If one takes into account the government’s declared objectives - in Monti’s words,
overcoming labor market segmentation - an important criterion for evaluating the
Fornero reform would be equity. For the dynamics of entry into the labor market,
such a criterion assumes an important intergenerational profile. Contrary to what
Monti himself stated in his keynote address, the reform affects also those already
employed with open-ended contracts and therefore is not a reform “at the
margin”52. At the same time, it introduces normative constraints and higher costs
for the use of fixed-term contracts (however, along with the complete
liberalisation of first fixed-term contracts up to 1 year, which can be stipulated
without providing specific reasons but cannot be renewed). The higher costs to be
borne by firms (i.e. reduced advantages in terms of cost between contracts) might
yield positive results, although the comparative evidence shows that institutional
modifications do not automatically have the desired effect. In Spain, for instance,
fixed-term contracts were liberalised in the mid 1980s and soon came to represent
one third of all contracts for employees (more than twice the European average).
Since then, attempts at reducing this share in favour of open-ended contracts, by
re-regulating fixed-term contracts and making dismissals easier, have failed (at
least, this was true before the crisis, which has hit workers with fixed-term
contracts much harder than those with open-ended contracts). In particular, less
stringent rules introduced in 2002, allowing individual dismissal without any valid
reasons simply by paying higher compensation, were widely adopted and caused
this practice to become extremely common vis-à-vis the standard dismissal
procedure, but they did not shift the balance towards the use of open-ended
contracts (this “expedited” dismissal procedure was then abolished through a
reform implemented by the Rajoy government in 2012, which made it easier to
dismiss workers for economic reasons).
In brief, regulations can be reformed but what truly matters, considering the
features of the Italian reform, is the behaviour of the actors involved: the firms,
but also the judges. Indeed, the outcome of the reform is likely to depend mostly
on the judges’ approach, which firms take into account when making their
strategic decisions.
In general, a worker dismissed for economic reasons will not be reinstated and will
not receive any compensation, unless the settlement procedure leads to an
agreement on monetary compensation or the worker decides to start legal
proceedings and the judge rules that the reasons for dismissal are illegitimate. The
introduction of a compulsory settlement phase prior to economic dismissal might
It is plausible to assume that both EU (European Commission and ECB) and international (OECD,
IMF) actors advised the Italian government against yet another reform at the margins, since the declared
aim of the reform was to curb segmentation.
lead to the emergence of a price for this kind of dismissal, based on the frequency
with which judges rule against the legitimacy of the economic reasons put forward
by employers. Nevertheless, the fact that judges might punish the “manifest nonexistence” of economic reasons by reinstating workers makes it harder for
employers to calculate costs in the worst-case scenario. Yet, differently from the
past, the reform imposes a 12-month limit on the lost monthly salaries to be paid
by employers in case of workers being reinstated after cases of (nondiscriminatory) dismissal deemed illegitimate. This is an important aspect which
limits the costs of reinstatement and makes it possible to estimate them. Hence,
contrary to what the international financial press generally believes, the reform can
certainly have major effects, making economic dismissal much easier than in the
past. In this regard, Confindustria’s underestimation of the impact of the reform
appears to be instrumental. At the same time, the effects of the reform cannot be
assessed without taking into account the behaviour of judges, which will most
likely influence that of Italian firms.
Returning to the reform’s potential to reduce labour market segmentation, it is
worth noting that, by not introducing any automatic severance payment, it
perpetuates discrimination against those who work in small enterprises, in
comparison to other workers employed with open-ended contracts, since the latter
might already be awarded monetary compensation during the settlement phase.
More generally, by not introducing any universal form of compensation for
contract termination proportional to a worker’s salary under all contract types and
paid by the employer if the labour relationship is terminated (in case of both openended and fixed-term contracts), the task of curbing fixed-term contracts used for
the sole purpose of transferring costs and risks from the enterprise to the worker
is left to two devices written in the reform. The first is a set of regulations that
have been heavily criticised, as mentioned above, due to their micro-regulative
framework (as well as heavily altered during the parliamentary process). The
second is by imposing the payment of higher unemployment insurance
contributions on firms that make use of fixed-term contracts (including temp
agency workers but excluding seasonal workers and apprentices). These measures
certainly increase the costs of non-standard work in comparison to open-ended
work, thus modifying the employer’s production function (even though also
employers who fire workers with open-ended contracts or do not hire apprentices
at the end of their apprentice contracts have to pay high additional contributions
to finance the insurance against unemployment). In general, however, the purpose
of the above provisions is to finance the extension of the unemployment
allowance, but all immediate financial benefits will go to INPS and not to the
Where the reform may achieve significant results in terms of increased equality is
through the new design of unemployment benefits. Starting in 2013, ASPI
replaced the previous ordinary unemployment benefit while retaining the same
eligibility criteria. Therefore, the share of workers eligible for it will not increase
(with the exception of apprentices, who will become eligible from 2015 onwards).
Yet, once it is fully implemented in 2016, its duration will be comparable to that of
the insurance schemes of many other European countries (one year, with possible
extension to 18 months for those over 55, in the presence of a sufficiently strong
contribution record; however, any period of benefit withdrawal in the previous 12
or 18 months will be subtracted from the total duration)53.
The chief innovations in terms of new potential recipients of unemployment
benefits come from the replacement of the previous reduced-contribution
allowance (a benefit received in a given year for employment gaps occurred in the
previous year regardless of the worker’s current situation) has been replaced by the
so-called mini-ASPI, which is a real unemployment scheme (hence, subject to the
rule of immediate availability to work) of an amount equal to that of the standard
ASPI but subject to reduced contribution requirements. Its duration equals half
the contribution record in the 12 months prior to unemployment, with a
minimum duration of 6.5 and a maximum duration of 26 weeks (duration is
however reduced if benefits have already been withdrawn recently). Thanks to the
mini-ASPI, the number of those eligible for unemployment insurance will increase
greatly in comparison to the previous situation and will come to include many
young people new to the labour market, in particular non-standard workers.
Based on microsimulations made on WHIP data, the number of employees who
do not get unemployment benefits (ASPI or mini-ASPI) if they lose their job is
reduced by more than two thirds, from 2 million to 600,000 approximately. In
particular, ineligibility among direct-hire fixed-term workers (direct-hire temps)
falls from 40% to 17%, and from 50% to 20% among temporary agency workers
(TAWs)54. As mentioned, this is mainly due to mini-ASPI, which however lasts for
a very short period of time: only 10% of eligible direct-hire temps and TAWs can
draw the benefit for the maximum six-month duration. At the same time, over
40% of eligible direct-hire temps and almost 50% of eligible TAWs are only able
to draw the benefit for less than 3 months.
To sum up, the reform reduces the share of those excluded, but the benefits
provided cover a very short spell, in many cases insufficient for the unemployed to
find another job. Undoubtedly, financial constraints – imposed by the State
General Accounting Department – were present from the very beginning and had
to be reckoned with in the designing of the unemployment insurance reform.
These, along with fears that workers and enterprises might develop opportunistic
behaviours without the control ensured by the use of employment contracts, led
the reform designers to abandon the idea of extending the new allowance to
independent contractors, for whom the reform simply overhauled an allowance
introduced by the Berlusconi government in 2009, that has proven to be rather
In conclusion, the reform increases the number of workers eligible for
unemployment insurance, but most of them will receive it for a very short period
of time, at the end of which, if they have not managed to find a new job, they will
be left without any form of protection from the Italian welfare system. Moreover,
those who are not eligible for unemployment benefits can be estimated in 600,000
employees (about 7% of dependent employment, excluding tenured public
employees), not to mention the self-employed. For all these, the Italian welfare
The maximum duration of the ASPI will increase progressively between 2013 and 2016, when it will be
fully implemented.
54 Microsimulations performed on WHIP data by the author with the help of Roberto Quaranta from the
Fondazione Collegio Carlo Alberto.
system has absolutely nothing to offer from the very first day of unemployment.
This brings to the one piece of income support conspicuous by its absence in the
Fornero reform (and the debate around it): the provision of a non-contributory
income support scheme for those who are able to work (or, more generally, a
minimum income scheme for those in need). Without such a scheme, support is
currently awarded to only around one third of unemployed workers in Italy. This
share is one of the lowest among developed countries, lower than the coverage
provided not only in other European countries (99% coverage in Germany, 74%
in Spain, and 60% in France) but also in the United States (38%)55. While this
coverage rate is bound to increase due to longer duration of the main scheme
(ASPI) and higher eligibility to the reduced-contribution scheme (mini-ASPI), it
can be doubted that – absent a non-contributory scheme – the increase will be
Similarly, the reform does not include incisive provisions for what concerns the
other fundamental pillar of an appropriate and complete flexicurity strategy: active
labour market policies and the building up of institutional capabilities to make
employment services work. In this regard, the reform rationalises the existing
system and introduces regulatory provisions, but all the above should be
implemented without additional resources. Considering that the public
employment services are in very poor condition in several parts of Italy, the
building up of institutional capabilities requires a certain amount of financial
investment, even though methods for cost reduction can surely be devised.
Otherwise, Italy risks repeating its usual mistake: laws are passed, but no measures
are taken to ensure that they are actually implemented.
It seems clear that the 2012 reform of the labour market (following the key
pension reform of December 2011) is a major and elaborate intervention,
involving several substantive and procedural aspects concerning the Italian labour
market and social protection system. The above sections have described its main
features in relation to contract types, individual dismissal, unemployment
insurance, and short-time work, while also presenting a preliminary assessment of
its potential effects. In particular, this paper has provided a detailed account of the
decisional process underlying the reform and its politics, strongly influenced by
the international political economy situation and by the commitments made by
Italy as a member of the European Union, and of the Economic and Monetary
Union in particular. It is now possible to mention some useful elements for a
causal interpretation of the reform.
Before the actual beginning of the decisional process, various issues – such as the
reform of individual dismissal regulations, the segmentation of the Italian labour
market, and the gaps in the unemployment compensation system – were put on
the agenda of the Italian government (which committed itself to taking action by
See International Labour Office, World Social Security Report 2010/11, Geneva, ILO, 2010.
May 2012) by the European Community institutions, first and foremost by the
European Central Bank and then by the European Commission and Council (as
well as by other international economic organisations, such as the IMF and the
OECD in their missions to member countries). During this phase, Italy was also
put under strict surveillance in the international economic and political arena;
therefore, it was natural for the policy solutions proposed by actors of high
standing (such as the ECB, IMF, and OECD) to quickly become the mantra of
international operators. A sort of informal conditionality – but with immediate
tangible effects – started to be applied. Such conditionality was not linked to the
drafting of memorandums of understanding regulating the terms for the supply of
financial aid, as had been the case for other European countries. Rather, it was
implemented on the one hand by supervising and coordinating the economic and
budget policies of the EU member states, particularly of the EMU, and on the
other hand through the leverage offered by the ECB’s autonomous decision to
purchase bonds on the secondary market. The strongest and most immediate
constraining effects certainly came from the markets, but the policy dimensions to
which the financial operators reacted were heavily influenced by the way in which
the problem was presented by Community and international institutions, often in
direct contradiction to the analysis carried out by those very same institutions. A
prime example concerns the behaviour of the OECD representatives, who urged
the Italian policymakers to reform the rules for individual dismissal. Such request
was ascribed to the supposed rigidity of the Italian labour market, a feature clearly
disproved by the employment protection index elaborated by the OECD itself.
Moreover, although not formalised through memoranda of understanding, the
conditionality imposed was anything but weak, and it went as far as to identify
preferred policy alternatives. To quote two examples, first the summit of the heads
of state and government leaders of the Eurozone entrusted the Commission with
the task of closely monitoring which actions Italy was taking and, shortly
afterwards, the Commission asked Italy for clarifications, demanding a detailed
answer within one week. Then, at the beginning of November, the ECB
Governing Council openly discussed the possibility of stopping the purchase of
Italian bonds through the Securities markets programme if, as it feared, the
Berlusconi government proved unable to implement the promised reforms.
During the following phase, the reform of the labour market was put on the
agenda as the Monti government took office. The ideas put forward by the
international institutions were perfectly in line with the opinions of the new Prime
Minister. Besides the need for greater equality, the reform was also motivated by
reasons linked to economic causality. By perpetuating the dwarfism of Italian
enterprises, the causal account went, Article 18 reduced their innovative potential
(which remained thus limited to incremental and process innovations rather than
radical and product innovations) and, by generating uncertainties regarding the
effects of individual dismissal, it prevented foreign firms from investing in Italy.
Furthermore, the decision-making style of the government was influenced by a
belief shared by many of its members. In their opinion, the organisations
representing the interests of the entrepreneurs and, above all, of the workers were
mainly concerned with protecting their positional rents, acquired through collusive
decisional processes, and, acting as distributional coalitions, they increase the
country’s regulatory complexity and contribute to reducing its economic growth
(Olson 1982). This is why the government refused concertation, opting instead for
a policymaking approach “in the shadow of hierarchy”: negotiations still occurred,
but it was made clear that the government would intervene unilaterally if the
decisional process did not progress or, more significantly, if it did not progress in
the direction indicated by Monti and his team. Their source of empowerment
came from the supranational and international level, from a multi-level policy
network including several extra-domestic actors that, despite not participating in
the negotiations directly, constantly monitored the development of the decisional
process and intervened through support as well as threats until the reform was
fully approved. Besides external constraints (the financial crisis, the commitments
made by the previous government, the correspondence between its own policy
solutions and the demands made by extra-domestic actors able to impose
conditionality), the government also took advantage of the fact that it had already
paved the way for the labour reform by implementing the pension reform in a
manner which had stunned the trade unions. In other words, the government had
learnt that it could draw due conclusions from its political economy view: the
consensus of the social partners that Monti had evoked only few weeks earlier
cannot be used to threaten to veto the government’s decisions, lest the latter act
Actually, the government did have to face the veto imposed by Confindustria and
the trade unions on its radical reform of the short-time work schemes, but it chose
to stand firm on the aspect that was most easily acknowledgeable in the
international arena and would probably strengthen its reputation the most: the
regulations for individual dismissal. At this point, the government – and in
particular Monti himself – started to act unilaterally. And yet even though, in stark
contrast with the 1992 situation, the government had now realised that it could do
without the social partners, it had to learn that, in a parliamentary system, it cannot
do without the parties. In spite of the hubris of its leader and main ministers, the
government was faced with the hard fact that a policy-without-politics strategy is
hard to pursue in a democracy, even in a context of low legitimacy of party
politics. This led to a mostly symbolic but very effective compromise, reached on
3rd April, which allowed the reform to be eventually discussed in Parliament (it is
worth noting that the trade unions’ role in cases of individual dismissal was greatly
increased thanks to the introduction of the compulsory preliminary conciliation
The parliamentary phase was characterised by constrained politics: the previously
defeated or dissatisfied interest groups exerted pressure through the parties, which
in turn had their own agenda, so that the reform was modified in various parts (for
instance, the presumptive criteria to distinguish the real self-employed from
employment relationships disguised as the former were made much less stringent)
but its overall framework was not undermined. Above all, the parties knew that
the compromise reached on Article 18, which did not displease the trade unions in
56 To some extent, this resonates with the argument put forward by Emmenegger and Davidsson
(2013), according to which the trade unions try to retain a key role in the management of dismissals and
in labour policy decisions, agreeing to reforms of the employment protection legislation provided that
this allows them to preserve the above sources of institutional power.
the end, was untouchable, and their leaders made this very clear to the
parliamentary groups. This also happened when a portion of the PD tried to
postpone the implementation of the income support reform. Politics could act
only within the boundaries marked by the pillars of the reform, and the
parliamentary process was closely monitored by the EU and international
institutions, which exerted pressure and moral suasion. When the thorny issue of
the “esodati” (which greatly discredited the Monti government) and the implosion
of the PDL threatened to hinder the approval of the reform in the Chamber of
Deputies, the external constraints were once again brought into play to urge the
approval of the reform, in order to be able to negotiate the terms of the Outright
monetary transaction programme at the European Council from a non-minority
Regardless of its substantive aspects and content, the labour market reform might
have long-term effects on Italy’s political economy, since it might contribute to
initiating a new phase in which technical as well as political governments, with
their autonomous parliamentary base, know that they can impose decisions “in the
shadow of hierarchy”, threatening the social partners with unilateral actions and
forcing them to accept their agenda. The comparative evidence confirms that this
has happened in European countries which have requested financial aid
(Armingeon and Baccaro 2012), and the Italian experience shows that the same
can also happen without conditionality being formalised through memoranda of
understanding. Of course, this also highlights the Italian government’s agency and
its deliberate use of a strategy based on external constraints. At the same time, the
Italian case seems to point, for a country ridden with a crisis of its sovereign debt,
at a major extension to technocratic extra-domestic actors of its policy networks
even in areas that are crucial for the generation and maintenance of political
support such as social and labour policy. Moreover, this seems to be happening to
an extent qualitatively incomparable to what had previously happened in the EU
within the context of the open method of coordination. All the above might hint
at a new phase in the relationships EU member states entertain with each other
and with the Community institutions.
To be provided