Labour market reforms in Italy and Spain: diversity and convergence

Abstract

FOCUS □ AUSTERITY ANDTRADEUNIONRIGHTSIN EUROPE Labour market reforms in Italy and Spain: diversity and convergence The pressure Southern drastic from Europe labour the market since European 2010 reforms under Commission passed direct in Southern Europe since 2010 underdirect pressurefromthe European Commission andtheEuropean Central Bank('ECB'),andindirect pressure from theGerman government, raise important questions on thedirection ofemployment relations andevenofdemocracy. Spainand Italy, as from June2012,have not neededrescuefrom theIMFand are notunder direct supervision, buthave been forcedbythe sovereign debt crisisto complywithunprecedentedrequirements from theEC and theECB. As an urgent condition forobtaining ECB intervention on thesovereign bondssecondary market , ina fewmonths bothcountries passeddeeper reforms thanovertheprevioustwenty years, withverylittle debateand socialnegotiations. If implemented, by decentralising collectivebargaining , liberalising employment protection and raisingthe retirement age, the reforms would produce a systemicchange in the so-called 'Mediterranean' employment and socialmodel. Two policy proposalshave been particular important fortheEC andtheECB since2010:the approaching ofcollective bargaining to thecompanyandto productivity, andtheliberalisation of employment protection through a flexible 'single open-ended contract' that wouldovercome labour market segmentation. Interestingly, there islittle or no evidencethatsuch proposalsmayhelp the economy orthelabour market, especially ata time ofrecession. Moreover, they contradict many ofthe previous Commission's Directorate General ('DG') forEmployment and SocialAffairs own elaboration ,expressed in particular in 2006 in boththe Employment inEurope andtheIndustrial Relations in Europereports, which acknowledgedsome advantages of employment protection legislation for human capital investment, andofco-ordinated collective bargaining to increase productivity and stabilise wagedevelopments. Theshift ofdecisionmaking powerfrom theDG forEmployment and SocialAffairs to theEcoFinCounciland theECB hascoincided withtheabandonment ofexpertise onthesocialsideoflabourmarket, andtheadoptionofsimplistic targets of flexibility and decentralisation . Italy Italy hadpassedimportant labourmarket reforms in 1997 and 2003,whichcorresponded to the fastest processof liberalisation amongstOECD countries in thelasttwodecades. However,the reforms had been conducted through socialdialogue ,withtripartite agreements (althoughthe largest union, CGIL,didnotsubscribe tothe2003 reform), and respectedthe core principles of multi-employer collective bargaining and ofprotection against dismissal. Whenin 2002thegovernment threatened thereform ofdismissal protection (art.18oftheWorkers' Statute of1970),a three-million demonstration ofCGILforceditto backtrack. Until thecrisis, Italy seemeda case of relatively enduring strength ofcollective bargainingand tradeunionism. Atthebeginning ofthe crisis, short-working time programmesand responsive tradeunionsallowedItaly tomaintain employment levelsdespitea sharpfallin GDP, similarly as in Germany. However,the country entered thecrisis withtwomajor economicproblems :highpublicdebtinherited from the1980s, whichmadethecountry very vulnerable ata time of crisis;and a productivity decline since the introduction of the Euro in 1999, which had worsenedcompetitiveness, especiallyin sectors with important new entrants such as Eastern Europe and China. Pressureon social rights steadily increased. In January 2009, the employer confederation Confindustria andtheunionsCISLandUILagreed a reform ofcollective bargaining, reducing wage indexation guarantees, despiteoppositionfrom CGIL. Moredrastic changeswere introduced in 2010-11bythelargest Italianindustrial company Fiat, nowcontrolling Chrysler andmanagedbyan Italo-American CEO, Sergio Marchionne.By threatening relocationto Poland, Marchionne couldobtaintheconsent ofCISLand UIL,and of a majority ofemployees inreferenda, tonewplant and companyagreements outsidethe sectoral metalworking agreement,introducing notably moreworking timeflexibility, anda peace clause. The Fiatagreements were of historic relevance becauseItaly had livedsince1948undertheillusionof an ergaomnessystem of sectoral agreements : whilenotlegally binding technically, sectoral agreements wereroutinely usedbythecourts as reference forsetting theconstitutional rights to fair wage and fair working time.The Fiatagreementsaffected unionrecognition too: by abandoning multi-employer agreements. Fiatalsowithdrewfrom theone of1993onthesystem ofworkplace unionrepresentation, and could de-recogniseall unionsthathad notsignedthecompany agreement, including CGIL,thelargest unionin thecompany, andinthemetalworking sector. On 28 June 2011 a new tripartite agreement was signed(including byCGIL)toreform sectoral collectiveagreements , allowingmore decentralisation , butstill ina co-ordinated way. In August thesituation precipitated becauseof financialturmoilin the Eurozone. Following unsustainable increasesinthespreadofgovernmentbonds ,on 5 August, theEuropeanCentral Bank's incumbent and elect presidents, JeanClaudeTrichet andMarioDraghi, wroteletters to theItalianand Spanishgovernments, askingfor austerity budgetmeasures, structural and constiEU institutions have abandoned expertiseon the social side of labour marketin simplistictargets offlexibility and decentralisation GUGLIELMO MEARDI is Professor of Industrial Relations atthe University of Warwick Page 3Volume 19Issue 22012 INTERNATIONAL union rights FOCUS □ AUSTERITY ANDTRADEUNIONRIGHTSIN EUROPE I untouchable, amended thought Constitution, scarcely The previously Spanish debate almost of with was any as Constitution, previously thoughtofas almost untouchable,was amended with scarcely any debate tutional reforms as implicit conditions forintervening ,fromthe following week, on the secondary marketsand purchasingItalian (and Spanish) bonds. The two crucial measures (besidepublicservices reforms) were:to 'further reform the collectivewage bargaining system allowingfirm-level agreements to tailorwages and working conditions to firms' specificneeds and increasing theirrelevancewithrespectto otherlayers ofnegotiations'; and to undertake 'a thorough review oftherulesregulating thehiring and dismissalof employees'.A further request fromthe ECB was the amendmentof the Constitution to...