Confindustria and Bank of Italy highlight industrial relations

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Late May 1999 saw the annual assembly of Italy's Confindustria employers' confederation and the publication of the Bank of Italy's Annual Report. In both cases, importance was assigned to reducing the tax burden, curbing public spending, and increasing labour market flexibility. Confindustria sees social concertation as important, but believes that the government should not always seek the consensus of the social partners.

The end of May 1999 saw two events of major importance: the annual assembly of the Confindustria employers' confederation (on 28 May 1999) and publication by the Bank of Italy of its 1998 Annual Report (on 31 May 1999).

Its assembly is one of the most important official events of the year for Confindustria, providing an occasion for discussion which sets out the course of action to be pursued by the main Italian employers' association. The Bank of Italy's Annual Report is one of the most important documents providing information on the country's economic performance and its future prospects. The Bank of Italy, moreover, is a key economic actor, not only because of its role (which is now set to change, following EU monetary union and the creation of the European Central Bank) but also because of the independence that has always been the Bank's distinctive feature. For these reasons, presentation of the report by the Governor of the Bank of Italy is always followed with close interest by all economic actors in the country: the government, businesses, and interest organisations.

In 1999, these two events came at a particularly crucial moment for Italy, in view of its recent poor economic performance (IT9905340F) and, as far as industrial relations are concerned, in view of the talks about to begin between the government and the social partners to define the "economic and financial planning document" for 2000-2003, and the complex negotiations over renewal of the metalworking sector collective agreement (IT9902243F).

Confindustria annual assembly

At the Confindustria annual assembly, the speech by its president, Giorgio Fossa, centred on the prospects for the Italian industrial system in an increasingly integrated world economic system. Although recognising the great changes of recent years that have enabled Italy to join EU Economic and Monetary Union, and thereby acquire greater international credibility, Mr Fossa reported a growing lack of confidence and unease among Italian employers and businesses due to the country's poor economic performance.

Businesses are aware that they now operate in a different context which obliges them to emphasise product quality and diversification and to reduce costs in order to withstand increasingly strong foreign competition, said Mr Fossa. For this reason, the priority goal should be improving the country's competitiveness, and in particular, greater impetus should be given to the process of liberalisation. The priority areas of action, according to the Confindustria president, are reforming the welfare state in order to curb public spending, reducing the tax burden, deregulating the labour market, reforming the public administration, privatisation, and investment in infrastructure.

As regards industrial relations, Mr Fossa concentrated on two issues in particular.

  • A different style of industrial relations. Industrial relations in Italy are inspired by a logic of resistance to change, claimed Mr Fossa. Negotiations over collective agreement renewals, he said, have turned into rituals concerning matters of little relevance to the real needs of businesses and workers. For example, issues like reduced working hours and pay increases should not be addressed separately from corporate performance: the competitiveness and performance of the firm must be taken as the benchmarks for all negotiations. Changes are also required on the labour market, where it is essential to introduce greater numerical flexibility by removing contractual constraints and facilitating labour market entry and exit. The experience of other countries like the USA shows that this is the way to encourage employment creation, according to the Confindustria president. In Italy too, the rise in employment levels during 1998 was largely due to the spread of atypical forms of work, like fixed-term, temporary and part-time work (IT9905115N).
  • The role of concertation. Experiences of social dialogue and concertation in Italy during the 1990s can be assessed positively (IT9901335F), said Mr Fossa. It has helped both to curb inflation and to reduce the public debt, and has laid the basis for a revival in growth. By means of concertation it has been possible to pursue goals that employers regard as being of crucial importance. Nevertheless, a differentiation should be maintained between the roles of the government, the unions and the employers' associations. Furthermore, is it not necessary to gain consensus on all issues. It is the government's task to set priorities. Concertation is an instrument, not an objective. If agreement is not reached, it is necessary to accept unpopularity and to pursue such general interests as the resumption of growth and the competitiveness of Italian industry. Mr Fossa's reference here is to issues likely to provoke fierce conflict, like reform of the welfare state - in particular the health service and the pensions system - and deregulation of the labour market, but also the rationalisation of publicly-owned enterprises like the state railways and the post office, in which union fragmentation makes consensus-building a complex undertaking.

Prime Minister Massimo D'Alema reacted positively to Mr Fossa's speech. However, he emphasised his government's commitment to reviving the competitiveness of Italian industry. As for concertation, he said that its strength lies in the identification of shared goals by actors with different interests. Moreover, the search for consensus should be viewed in terms of defining a project, rather than of mediating between partisan interests.

More critical has been the reaction by the general secretaries of three main trade union confederations - Cgil, Cisl and Uil- especially as regards issues at the centre of Mr Fossa's speech, like reform of the welfare system and deregulation of the labour market. According to the unions, it is simplistic to consider these aspects as being solely responsible for the loss of competitiveness by Italian firms, since this also depends on their low level of innovative capacity. However, opinions on Mr Fossa's remarks on concertation differed. Sergio Cofferati of Cgil found them interesting, especially as regards the differentiation between the roles of the actors involved, while Sergio D'Antoni of Cisl said that in any case Mr Fossa recognised the positive role played by concertation. However, according to Pietro Larizza of Uil, Mr Fossa's views may lead to a worsening of relations between the social partners.

Bank of Italy's annual report

Publication of its Annual Report by the Bank of Italy is an occasion for reflection on the performance of the Italian economy and on its future prospects. It also contains important indications of possible economic policy directions. To summarise very briefly, the report presented in May 1999 by the governor of the Bank of Italy, Antonio Fazio, addresses two main issues - reducing the public debt and employment creation.

According to the Bank, in 1998 the performance of the Italian economy was negatively affected by the efforts made in recent years to reduce the public debt. Added to this were the fall-off in consumption and investment in Italy and, more generally, the consequences of the economic crisis that hit the countries of south-east Asia and Russia. The means to revive the economy are, according to the Report, principally the reduction of fiscal pressure and cutbacks in public spending.

The process of EU monetary union increased the tax burden in Italy from 39% of GDP in 1989 to 44.8% in 1997, with a slight fall in 1998 to 43.6%. This large fiscal burden has harmful consequences on both consumption and investment by firms.

Reducing the public debt continues to be a priority goal, bearing in mind the parameters for monetary union. However, it cannot be achieved by further increasing taxation, but rather by reducing public spending, says the Bank. There are two areas in which action should be taken: the health service and the pensions system. As regards the former, the criteria for entitlement to services should be revised and a form of supplementary health insurance should be introduced. Though emphasising the positive effects of the reform of pensions systems between 1992 and 1995, the governor of the Bank declared that further action was necessary to reduce the burden on the system imposed by the ageing of the population.

The Bank of Italy's report also contains important information on the labour market. Employment rose by 0.7% in 1998, an increase brought about by the use of "atypical" employment contracts. More flexible employment relationships fostered job creation despite the weak growth of the economy. Thus, the proportion of workers on fixed-term contracts was 8.9% in 1998 compared with 6.2% in 1993. The use of part-time labour is also increasing (7% of all workers in 1998) although it remains below the European average. In order to attenuate job insecurity, it is important to achieve strong economic growth, which requires high levels of both public and private investment, according to the report. Private investment is said to be discouraged by the characteristics of the Italian productive system, with its large number of small firms.

According to Mr Fazio, it is also necessary to introduce by collective agreement (at the sectoral and company levels) a greater differentiation of labour costs by linking them to productivity.

Mr Fazio emphasised the importance of labour market flexibility by citing the example of the USA, stating that the positive performance of the US economy and its employment rate has been achieved combining high-technology investments and increased productivity with labour market flexibility.

The governor's remarks provoked differing reactions from the social partners. The president of Confindustria, Mr Fossa, pointed out that there is a certain convergence between the positions expressed by the Bank of Italy and those of his own organisation. He endorsed in particular Mr Fazio's call for reduced fiscal pressure, cuts in public spending, and increased labour market flexibility.

The unions are less enthusiastic, although the Cisl general secretary, Mr D'Antoni, noted that Mr Fazio had recognised the merits of previous reforms of the pensions system. Criticisms have been voiced by the secretary of Cgil, Mr Cofferati, especially as regards Mr Fazio's comments on reforming the pensions system and increasing labour market flexibility still further.


Despite the difference in the organisations' roles, similarities can be noted between the Bank of Italy report and the issues raised at the Confindustria assembly. However, this comes as no surprise. Labour market flexibility and reform of the welfare system in order to reduce public spending are priorities for all the EU countries.

The negative reactions by the trade unions concern more than anything else the means to achieve these goals. In recent years Italy has pursued a policy of negotiated deregulation of the labour market. Reform of the welfare state, too, has been largely consensus-based. Consequently, the Italian trade unions have not acted exclusively in defence of the status quo in recent years.

Nonetheless, reform of the pensions system may provoke conflict. The unions insist that the reform should not begin before the assessment scheduled in 2001, not least because, according to the unions, the trend in social security spending is in line with predictions. Moreover, doubts have been raised over a policy which prioritises cutbacks in social spending in order to revive the economy. (Marco Trentini, Ires Lombardia)

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