* Monti's ratings tumble after labour reform plan
* In downturn appeal of job protection is even stronger
* Past labour conflict means Italians mistrust employers
* Labour experts doubt reform will curb "dual" labour market
By Gavin Jones
ROME, March 27 (Reuters) - Prime Minister Mario Monti's labour reform plan is unpopular even among the young Italians it aims to help, who don't believe his message that it will create a fairer, more dynamic jobs market and boost employment.
Italians not only dislike the reform, which makes it easier for firms to fire and gives them financial incentives to hire permanent workers rather than temporary staff - but for the first time they are also starting to dislike Monti's government.
Young people are sceptical that easing firing restrictions will lead firms to hire more, and in the current economic crisis the appeal of strong job protection is even greater.
About 67 percent of Italians gave a negative judgement of the reform agreed by the cabinet last week, according to an opinion poll by the ISPO agency published on Sunday in Corriere della Sera newspaper, while just 29 percent liked it.
The approval rating of Monti's technocat government dived to 44 percent from 62 percent only three weeks earlier.
Other polls give similar findings, confirming that Italians doubt Monti's claim that his plan can level out a two tier labour market that gives too much protection to older, salaried workers and few prospects or rights to millions of mostly young workers on temporary contracts.
The reform proposes reducing protection offered by article 18 of the labour statute. This stipulates that firms with more than 15 employees must reinstate workers judged by a court to have been wrongly dismissed, with full payment of lost earnings.
Trade unions say article 18 is a basic principle of workers' rights, but it leads to the "duality" of Italy's labour market, because it does not apply to a growing army of mostly young workers with temporary jobs or those in small companies - making up between 50 and 65 percent of the workforce.
"The paradox is that it's not just the insiders that want to keep article 18 as it is, but also many temporary workers and the unemployed who should have most to gain by reforming it," said Giorgio Navaretti, economics professor at Milan University.
This was confirmed by ISPO President Renato Mannheimer, who told Reuters there was little difference in the poll's findings between older, protected workers and young, unprotected or unemployed ones.
"They are afraid, they don't believe this reform will help them and they are obsessed by the idea of getting a permanent, protected job," he said.
Navaretti said many so-called "precarious" workers make no link between their own plight and the strong protection given to those with permanent jobs, while the aspiration of future job security is even greater at a time of uncertainty when youth unemployment has hit 30 percent.
Renato Fasano, a 28 year-old consultant with a financial services company, is typical of the precarious worker - unable to plan his future or obtain a mortgage - who should in theory benefit from Monti's reform.
He is one of thousands who, despite working full time for the same company for years, are obliged to register as self employed to save costs for their employer, yet Fasano does not expect the changes proposed to article 18 would help him.
"I don't believe that if companies can fire more easily they will hire more regular workers and even if they do, then what is the benefit? They could fire you before as a temporary worker and now they will fire you as a permanent one," he said.
Antonio Marchi, 38, works for a company offering catch-up courses and other services for university students. He has never had a regular contract and when business slowed, his employer halved his pay and told him he could leave if he didn't like it.
"I have been working for the same company for 10 years, but without a proper contract I can't even get hire purchase to buy a washing machine for 50 euros a month for a year."
Marchi said article 18 was "for the privileged", yet he also rejected the idea that companies will hire more if its protections are reduced. "That argument doesn't stand up. You don't get more hires by making it easier to fire," he said.
Labour law professor Tiziano Treu, a labour minister in the 1990s, said Italians' unwillingness to give up the benefits of article 18 was partly due to bad industrial relations and hostility towards most employers.
"There has been a long tradition of labour conflict and many workers believe, with some reason, that companies aren't interested in investing or growing and won't hesitate to offload staff just to reduce costs," he said.
Navaretti agreed that there was "very strong scepticism and lack of trust in companies' ability to invest and create jobs".
He said this was partly justified by an industrial structure of small, undercapitalised, family-owned firms, but was amplified by almost blanket media portrayal of Italy's industry as "washed up, uncompetitive and only wanting to fire people".
President Giorgio Napolitano tried to reassure Italians when he said after the government presented its reform plan that it would not result in "an avalanche of firings".
Even economists that applaud some aspects of the reform have doubts that it can curb the dual labour market as planned.
Navaretti said Monti should have abolished or strongly limited temporary contracts rather than just introduced disincentives to use them.
Labour expert Tito Boeri, an economics professor at the same Bocconi University where Monti was rector, said firms are likely to continue hiring on temporary contracts and simply pass on to workers the higher costs they will entail by cutting their pay.
Monti argues that article 18 in its present form deters foreign investment, yet Treu said the issue is largely symbolic, since around 90 percent of workers who were offered the possibility of reinstatement chose to take compensation instead.
Italy's largest union, the CGIL, which fiercely opposes Monti's plans, said that of 31,000 cases it had brought on behalf of workers for wrongful dismissal in the last four years, only 70, or around 0.2 percent, had resulted in reinstatement.