Italy wins labor reform votes ahead of EU summit

ROME Wed Jun 27, 2012 11:18am EDT

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ROME (Reuters) - Italian Prime Minister Mario Monti scored a hard-fought victory for his landmark labor reform on Wednesday, bolstering his position for a European Union summit where he will ask for more growth policies and a mechanism to stem borrowing costs.

The lower house in Rome voted overwhelmingly in favor of the law in the last of four confidence ballots held to accelerate the approval process ahead of Thursday's negotiations in Brussels on the future of the euro.

First promised when he took office in November, the legislation aims to ease firing procedures, broaden unemployment benefits from 2017 and end abuses to temporary hiring schemes that allowed employers to avoid taking on full-time workers.

The Chamber of Deputies was due to definitively approve the measure later on Wednesday in a routine vote.

The reform was formally sent to parliament three months ago after weeks of negotiations with labor unions and employers, but it ran aground as political parties sought to modify it.

The result is a watered-down reform that trade unions have criticized fearing an increase in lay-offs, that employers say will raise labor costs, and that many economists view as timid for a labor market that needs a major shake-up.

Unions have already held several strikes and protests against the proposed changes.

Labour Minister Elsa Fornero, the main proponent of the reform, defended it on Wednesday in an interview with the Wall Street Journal. "We're trying to protect individuals, not their jobs," she said. "People's attitudes have to change. Work isn't a right; it has to be earned, including through sacrifice."

SUMMIT

Monti asked parliament last week to hasten approval of the package "so that the European Council on June 28 can take note of the passage of this important structural reform."

He has promised to push for a shift away from austerity towards boosting economic growth, and for joint action by EU countries to help ease market pressure on Italian bonds.

His agenda risks a showdown with Germany, the EU's biggest, most robust economy and effective paymaster, which has refused to share the burden of other countries' debt.

Monti replaced discredited Silvio Berlusconi as prime minister late last year as recession-hit Italy teetered on the edge of a Greek-style default, and passed a tough austerity package to try to restore investor confidence.

The measures, including 24 billion euros in new taxes for this year alone, pushed down Rome's borrowing costs for awhile. But concern over the future of the euro currency zone has pushed benchmark bond yields back above 6 percent.

Difficulties over the labour reform have accelerated a slide in Monti's popularity ratings that started with discontent over the tax hikes and spending cuts in his austerity plan.

His approval rating has dropped to 33 percent, less than half the 71 percent he had when he took office in November, according to an SWG poll published this month.

(Reporting by Catherine Hornby and Steve Scherer; editing by Philip Pullella and Mark Heinrich)

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