UPDATE 4-Italian union calls strike over Monti's job reforms
* Biggest union calls eight-hour stoppage
* Monti says other unions back reform
* Monti, takes off gloves, says no more talking
ROME, March 21 (Reuters) - Italy's largest trade union called a general strike over labour reforms on Wednesday, escalating a confrontation with Prime Minister Mario Monti and testing his resolve to transform the euro zone's third biggest economy.
After weeks of negotiation, Monti announced late on Tuesday that the time for talking was over and he would press on with plans to overhaul employment protection laws dating back to the 1970s, despite stiff opposition from the left-wing CGIL union.
Reforming Italy's economy is at the heart of efforts to restore confidence in the euro zone and Monti's drive to shake up labour laws is being closely watched on financial markets.
The CGIL proposed an eight-hour general strike and another eight hours of smaller stoppages to protest against the measures, which would allow companies to lay off individual employees for disciplinary or business reasons.
"This will not be a flare-up which burns out in a day as the government expects and we have a duty to get results before we see years of mass dismissals from companies," the union's secretariat said in a statement.
A day-long strike would be the biggest demonstration yet against unelected technocrat premier Monti, a former European Commissioner who has imposed painful cuts and tax hikes and an overhaul of the pension system since taking office in November.
CGIL head Susanna Camusso, a tough, gravel-voiced chain smoker and the union's first woman leader, said Monti's entire programme had put the burden of sacrifice on ordinary people.
"We are dealing with a government which, in the end, unloads all the real costs of what they are doing on workers, pensioners and people soon to be on pensions," she told a news conference.
"Reforming the labour market will not, in itself, create a single job," she said, adding that waves of austerity would hurt Italy's enfeebled economy.
Employers welcomed the proposed changes to laws which they say discourage companies from hiring staff, hinder investment and condemn large numbers of young people to insecure, low-paid work with few rights.
"It's quite a profound change because it affects pretty much all issues relating to the labour market," Marco Venturi, head of the small business association Rete Imprese told Canale 5 television. "It was a long, drawn out discussion which ended with a conclusion which I think is quite satisfactory."
Monti, who clashed with U.S. corporate giants Microsoft and General Electric during his years in Brussels, has unveiled his tougher, uncompromising side by brushing aside opposition to a reform that was demanded last year by Italy's European partners.
He said that while he was worried by the CGIL position he would not negotiate further now that he had the broad support of the more moderate CISL and UIL unions as well as employers.
The reform plan unveiled on Tuesday went further than expected by weakening protections against dismissal not only in new contracts, as expected, but also for millions of people already in employment.
The key reform to Article 18 of the labour code, a talisman for the unions of concessions they secured from bosses 40 years ago in the heyday of their power, will be presented to parliament after fine-tuning during the rest of this week.
The parliamentary process presents another challenge for Monti. The centre-left Democrat Party, one of the main groupings he needs for support, has strong ties with the CGIL and risks a split between its more centrist and leftist wings, potentially threatening the stability of the government.
While the reforms do not go as far as some labour experts had urged, if Monti is successful they will bolster confidence in his ability to push through the major changes that are needed to restore growth and reduce high public debt and unemployment.
Appointed as Italy faced the risk of a Greek-style debt crisis, Monti has helped calm panicked markets. Benchmark bond yields, the key indicator of government borrowing costs, have declined sharply from the danger levels of more than 7 percent they reached at the height of the crisis.
However the problem of a debt mountain equivalent to 120 percent of gross domestic product, second only to Greece in the euro zone, and chronically weak economic growth remain.
Tito Boeri, a professor at Bocconi university where Monti was rector, said the reforms would do little to reduce the number of people in insecure, short-term employment, although they would make such contracts more costly for employers.
But he added that Monti's willingness to take on the unions and forge ahead despite failed negotiations marked a major change from past practice.
"The method is an important innovation in Italy and that is certainly to be welcomed because there was this practice in which the so-called social partners could exert power and this is clearly unsustainable," he said. "But in terms of the content of the reform I have serious doubts."
He noted that the changes will hand considerable power to the courts, which will have to rule on disputed cases and decide whether workers who successfully challenge their dismissal are reinstated or offered a payoff.
The changes would extend the current system of unemployment cover which excludes workers on temporary contracts but would still leave many with no protection if they lost their jobs.
More than 30 percent of 18- to 24-year olds in Italy are unemployed, and only about 57 percent of Italians have a job, giving the country one of the lowest employment rates in the euro zone.
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