Important agreement signed on restructuring the state railways

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In November 1999, the government, company management and trade unions signed a framework agreement on restructuring the Italian state railways (FS). The agreement covers all the main areas of the crisis currently afflicting FS – overstaffing, high labour costs, low profits and inefficient organisation – in order to balance the company's books by 2005. The agreement was not signed by the autonomous unions grouped in the Orsa umbrella body, which called a 24-hour national protest strike in December.

For decades the Italian state railways (Ferrovie dello Stato, FS) have suffered from a severe economic crisis which neither conversion from a state-owned enterprise to a joint stock company, nor drastic reductions in staffing levels between 1990 and 1996 (more than 80,000 jobs shed out of a total of around 200,000), have been able to resolve (IT9712316F).

At the beginning of 1997, this situation prompted the Italian government, as the majority shareholder in FS, to intervene directly by issuing the so-called "Prodi directive" (which took the name of the then Prime Minister). This government directive required FS to draw up a recovery plan which would balance its accounts by 2000 and envisaged a new corporate set-up complying with EU Council Directive 91/440/EEC on the development of the Community's railways, which divided the railways between two companies, one running the rail network and the other managing transport services (IT9702101N). The latter was to be further divided among companies with specific responsibilities (long-distance passenger traffic, local traffic, goods transport and maintenance).

The government directive influenced negotiations on renewing the FS collective agreement in 1998. Indeed, the national railway workers agreement signed in 1998 was substantially geared to reducing labour costs, to the extent that it came close to being rejected in a referendum of workers (with 51% of votes in favour and 49% against). In exchange for wage restraint, the union confederations obtained a slowdown in the conversion of the railways into a limited company.

However, in 1998 the economic situation of FS showed no signs of improvement. It was thus evident that the schedule set by the Prodi directive could not be fulfilled, and in March 1999 the new government headed by Massimo D'Alema was forced to issue a further directive which appeared more amenable to the positions taken up by the social partners. It granted the request by the trade unions that division into separate companies should go no further than the basic split between the rail network and transport services, while also fixing 2003 as the new deadline for balancing the accounts and committing the government to a plan to relaunch the railways, although this was conditional on effective restructuring of the company.

The agreement

An agreement was reached on 17 November 1999 as part of tripartite negotiations between government, unions and the company over renewal of the national railway workers collective agreement, which expired in 1999. The government and the unions (the three transport unions affiliated to the main confederations - Filt-Cgil, Fit-Cisl, and Uiltrasporti- and some autonomous unions - Ugl, Fisast and Sma) agreed on a plan drawn up by the unions which envisaged an 18%-20% reduction in labour costs (between ITL 1,600 billion and ITL 1,800 billion) by 2005. This reduction was to be achieved by means of: a pay freeze lasting for the duration of the future collective agreement for 2000-3; the flexibilisation of work organisation; the restructuring of job grades; and substantial personnel reductions, amounting to around 18,000 jobs (approximately 15% of the workforce).

Although the trade unions' proposal postponed completion of the restructuring plan until 2005, it was approved by the government, which was well aware of effort made by the unions amid the hostility of the railway workers to any suggestion of cutting labour costs. This hostility was exploited by the autonomous unions opposed to the plan, namely Comu, Ucs and Fisafs, united under the umbrella organisation, Orsa, which represents almost 15% of the workforce and is particularly strong among more highly skilled workers, engine drivers and station masters. Orsa called a 24-hour national protest strike in December.

However, the FS management rejected the trade union proposal on the ground that it was not radical enough. The management had maintained for some time, in fact, that structural action was required to reduce labour costs, arguing that a 20%-30% reduction was indispensable. Talks therefore resumed and culminated in the important agreement of 17 November 1999, the outcome of a compromise between the positions of management and the unions.

Compared with its original version, the agreement signed has introduced greater savings to be achieved by reducing the unit labour cost. It provides for the creation of a new item in the pay packet called the Eri (Elemento Retributivo Individualeor individual pay component), designed to reduce the unit cost of labour. For employees hired before July 2000, the Eri will cover the differences in wages due to the introduction of a new job classification (starting from July 2000). The Eri will reduce the unit labour costs of the newly-hired workers. It is estimated that introduction of the Eri will yield savings of between ITL 500 billion and ITL 1,000 billion, or 6%-12% of the current cost of labour on the railways. However, this is only a hypothesis, given that quantification of the Eri has been deferred to future second-level (ie company-level) bargaining.

Besides introducing the Eri, the November 1999 agreement also provides for reform of the so-called "supplementary" component of wages linked to company performance. This will be divided into two parts. The first will be paid to all railway workers and will be linked to achievement of the targets set by the company plan (ie financial recovery), while the second will instead be tied to increases in productivity and profit levels.

Despite the cuts in spending envisaged by the November 1999 agreement, it is estimated that the time-frame for recovery set by the "D'Alema directive" will be fulfilled only by the future company for transport services, while the company due to run the rail network may fail to meet the deadline of 2005. A further problem is the opposition raised against the agreement by Orsa, which will probably lead to either increased conflict or to concessions which may reduce the amount of savings achieved.


The agreement of 17 November 1999 may prove to be a turning point in the endeavour to restore the Italian railways to economic health. However, since interventions regarded as decisive have followed each other at regular intervals over the past 15 years, the majority of commentators, though evaluating the agreement positively, are pessimistic about its chances of success. Specification of the numbers of job cuts to be made, and of the reductions to be achieved in labour costs, is assigned entirely to negotiations over renewal of the national collective agreement, and this presages a period of negotiations which will be anything but straightforward. Further uncertainty is caused by the present phase of political instability. There is finally the unpredictability of the reaction by newly-hired workers to their penalisation by the future pay regime, bearing in mind also the continuing fragmentation of workers; representation on the railways and the conflictual positions that some autonomous unions have been taken up. Nevertheless, due recognition should be given to the high level of responsibility shown by the unions favourable to the agreement, which are probably unable to go any further in aiding the financial recovery of FS without risking a severe crisis of consensus among their membership. (Massimo Zanetti – Ires Lombardia)

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