Tripartite negotiations on welfare reform are underway

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Over May-June 1997, the dialogue between the Italian Government, trade unions and employers has been extended to welfare reform and policies related to EU Economic and Monetary Union (EMU).

On 30 May 1997, following consultation the with social partners, the Government approved a document on the economic and financial programme (Documento di programmazione economico-finanziaria, or DPEF) for the three-year period, 1998-2000, which contains the budgetary indications for 1998, the reference year for the respect of the EMU parameters laid down by the Maastricht Treaty on European Union.

The document does not set out details of the cuts in expenditure, in particular on pensions and health, as the Government believes that before giving specific instructions it has to seek the consensus of the social partners. The dialogue between the Government, trade unions and employers on welfare reform (IT9703303F) started on 18 June. The negotiations will not be easy, as the starting positions are so diverse, in spite of some provisional consensus on the figures indicated by the DPEF.

The DPEF fixes a deficit reduction figure of ITL 25,000 billion for 1998, which is deemed necessary to keep within the limits set by the Maastricht Treaty. This will be achieved by ITL 15,000 billion of reductions in public expenditure (which should concern the railways, the postal and welfare services, among other savings) and ITL 10,000 billion of new revenues.

Growth in gross national product (GNP) is forecast by the DPEF to be 2% in 1998, 2.5% in 1999 and 2.7% in the year 2000, while inflation is estimated at 1.8% in 1998 and 1.5% in each of the two following years.

The forecast increase in GNP is particularly significant, as it is on this figure that demands to reduce the increase in pension expenditure (currently greater than the increase in GNP) are based. The 1995 reform of the pension system provided for a gradual containment of such expenditure, but many consider that acceleration of the process is required. The three most important trade union confederations, Cgil, Cisl e Uil believe that the 1995 reform remains fully valid, though they intend to continue discussions with the Government and the Confindustria employers' confederation, on the conditions that these discussions concern the entire welfare and social security system - not just pensions - and that it is linked to employment policy. Confindustria agrees with the Government's objectives, which it considers to be attainable, but fears an excessive lengthening of the negotiating period and is deferring a fuller judgment until the negotiations on welfare reform take place.

In his speech at Confindustria's annual assembly in May (IT9706111N) and in statements broadcast on television in early June, the Prime Minister, Romano Prodi, underlined that the Government has decided to make reforms to the welfare state within a reasonable length of time. However it does not want to impose unilateral solutions, as the consensus of the social partners must be sought, and he believes that the right conditions exist to achieve this consensus.

The start of the negotiations has so far been difficult, due to the differing positions of the Government and trade unions, but talks were due to continue at the beginning of July.