The government crisis and the reaction of the social partners
In October 1997, the Italian Government was thrown into crisis over its attempts to push the 1998 Budget through Parliament. Trade union and employers' organisations had approved the Budget and called for an end to the political crisis, which was resolved in mid-month.
The Government's proposed 1998 Budget, drawn up with the aim of keeping Italy's economic performance within the parameters laid down in the Maastricht Treaty on European Union, provided for a reduction of the ITL 25,000 billion public deficit, split between a reduction of expenses and an increase of incomes. The reduction of public expenses would be reached through a saving of ITL 4,600 billion on pensions expenditure - the details of which would have to be negotiated with the trade union confederations, Cgil, Cisl and Uil- while the increase in incomes would be achieved through modifying the VAT rate.
Cgil, Cisl and Uil gave a positive reaction to the Budget, defining it as balanced and useful in guaranteeing Italy's participation in the EU Economic and Monetary Union (EMU) right from the start. The Confindustria employers' confederation also made a favourable judgment of the Budget, which its president, Giorgio Fossa, described as "the minimum effort necessary to participate in monetary union and a necessary form of action, in order to respect Italy's role in the Maastricht Treaty".
The Budget was however assessed negatively by the Rifondazione Comunista party, which announced its intention not to vote in favour of the proposed budget in Parliament. This decision precipitated a government crisis and led to the resignation of the Prime Minister, Romano Prodi, on 1 October 1997.
The social partners all expressed their deep concern at the government crisis. The trade unions in particular considered the crisis as "an extremely serious event with negative consequences for workers and pensioners". Confindustria called on Parliament to overcome the crisis as soon as possible and in any event to approve the Budget as agreed upon in tripartite negotiations between the Government, Confindustria and the trade unions.
The crisis was resolved on 16 October with a parliamentary vote of confidence in the Government, and it was thus possible for the Budget to be approved with only one modification - a reduction of ITL 500 billion in the savings to be achieved through cuts in welfare expenditure (these savings will now amount to ITL 4,100 billion). The Government agreed not to modify the law which regulates the pensions of blue-collar industrial workers and has furthermore taken on the task of drawing up the framework of a law - to be presented in January 1998 - which provides for the reduction of the working week to 35 hours, starting from 2001 (IT9710133N).
In response to this last aspect of the government decision, Confindustria, Cgil, Cisl and Uil expressed their common disapproval, as they believe that the reduction of working hours should be decided through negotiations between the social partners and that this is a legislative initiative contrary to the July 1993 central agreement, which put the method of defining incomes policy through bargaining into practice.