ROME Prime Minister Mario Monti faces an arduous task this week to reconcile the demands of unions and employers and draft a labor reform aimed at boosting Italy's competitiveness and shielding it from the euro zone debt crisis.
With a self-imposed deadline to get a deal by the end of this week the signs are not promising, with the largest trade union saying an accord at a key meeting on Tuesday is "impossible," and the biggest employers' lobby warning it will not sign any document that concedes too much to the unions.
On Sunday, Monti played down the tensions, saying he still believed a deal could be struck at the meeting he will host on Tuesday.
"If the positions weren't still quite far apart it would mean the conclusive meeting had already taken place successfully," he said at a ceremony in Turin. "Instead that (meeting) still has to happen."
On Saturday, he had called for all sides to "give some ground" and indicated he was not entirely happy with the proposals drawn up so far by Welfare Minister Elsa Fornero.
"On Tuesday I will ask (Fornero) to take even more account of the interests of the future and of young people," he told a conference in Milan.
After the deal was done, he said he planned a "roadshow" around Europe to explain why it made Italy a more attractive place to invest, even though the trade unions continue to insist it may not have their backing.
Monti has repeatedly stressed, however, that he will push ahead with reform even if he cannot reach agreement with the unions. He has said talks with unions and employers will end this week and that the reform will be presented by the end of March.
The three main union confederations, with varying degrees of vehemence, continue to resist government plans to ease firing restrictions, while small businesses are up in arms over a proposed hike in their contributions to fund welfare provisions.
Susanna Camusso, the head of the largest union, the left-wing CGIL, said all sides were still far apart and ruled out a deal as early as Tuesday. The leaders of the smaller CISL and UIL unions also said they were pessimistic.
Business groups say they also have serious concerns.
Confindustria, the main employers' lobby, has threatened not to sign a deal if Monti gives too much ground to the unions, while the issue also divides the centre-right and centre-left parties that make up his parliamentary majority.
Some economists say Monti's reform plans are still too timid to remedy a two-tier labor market that gives too much protection to regular salaried workers and no rights to hundreds of thousands of mostly young people on temporary contracts.
Monti has been widely praised for improving market confidence in Italy, which was teetering on the brink of a Greek-style debt crisis when he took office four months ago.
However, many analysts say a convincing labor reform is vital to consolidate the upturn in sentiment, as well as to improve Italy's dismal levels of employment, productivity and growth. Only around 57 percent of Italians work, the second lowest proportion in the euro zone after Malta.
Some of the hardening of negotiating positions can be put down to posturing in the search for last minute concessions as weeks of talks draw to an end. But divergences between unions and employers on how to fix Italy's "dual" labor market remain real.
While the unions stress the need to curb temporary contracts, employers emphasize the need to make it easier to fire workers with regular contracts.
The issue is also widening the gap between the conservative and left-leaning parties supporting Monti.
"Go On Elsa, be courageous," said Angelino Alfano, the national secretary of former prime minister Silvio Berlusconi's People of Freedom party on Saturday, urging the country's welfare minister to ignore the unions and push ahead with a business-friendly reform.
The exhortation is guaranteed to annoy Pierluigi Bersani, the leader of the centre-left Democratic party, who risks losing votes if he withdraws all support from the CGIL, with which his party has strong historic ties.
Monti is already drawing criticism from some economists for discarding radical proposals, such as eliminating dozens of different kinds of temporary contracts but reducing the job protection that regular contracts currently afford.
Tito Boeri, economics professor at the same Bocconi university in Milan where Monti was rector, said the current reform draft, which leaves all temporary contracts in place, fell far short of what was required.
He also said a planned overhaul of welfare benefits would still leave thousands of people with no income support and that it was "absurd" that the new system would only kick in from 2017, meaning it was almost sure to be changed by future governments.
(Additional reporting by Lisa Jucca in Milan; Editing by Andrew Osborn)