Government launches anti-crisis measures
On 28 November 2008, the Italian Council of Ministers approved the so-called ‘anti-crisis decree’, which sets out the government’s economic policy measures to restore consumer and business confidence – currently at the lowest levels since 1993 – and thus relaunch the Italian economy. Business leaders have approved the general provisions of the decree but are calling for more resources, while the main trade union announced a four-hour general strike in protest.
Magnitude of economic crisis in Italy
The global financial crisis has exacerbated the already difficult situation in the Italian economy, and all forecasts for the coming months predict a further deterioration. According to the forecasts of the Confederation of Italian Industry (Confederazione Generale dell’Industria Italiana, Confindustria), Italian gross domestic product (GDP) was due to decline by 0.4% in 2008 and by 1% in 2009. Moreover, according to a study by the General Confederation of Italian Workers (Confederazione Generale Italiana del Lavoro, Cgil), between January and November 2008 362,000 workers – equal to about 5% of employees in Italy – were involved in company difficulties and benefited in various respects from the country’s social ‘shock absorbers’ (ammortizzatori sociali) (IT9802319F, IT0205204F). The latter mainly consist of special funds to support workers in companies undergoing severe economic difficulties.
Furthermore, the 2008 Report on Industry (in Italian, 1.3Mb PDF) published by the Italian Confederation of Workers’ Trade Unions (Confederazione Italiana Sindacati Lavoratori, Cisl) estimates that, over the next two years, 900,000 jobs will be at risk in the manufacturing and construction sectors.
Measures envisaged by decree
Faced with this scenario and with the lowest consumer and business confidence levels since 1993, the centre-right government, led by Silvio Berlusconi, has issued Decree Law No. 185/2008 on Urgent measures to support families, work, employment and business, and to restructure the National Strategic Framework to combat the crisis (in Italian, 263Kb PDF). The Italian Council of Ministers approved the so-called ‘anti-crisis decree’ on 28 November 2008. The new law consists of 35 articles and provides for an economic recovery package amounting to €6.4 billion; further legislation will implement the individual measures. The main provisions that directly concern workers and companies are outlined below.
An annual extraordinary bonus – planned only for 2009 – will be paid to families, workers, pensioners and disabled persons. It amounts to a sum ranging from a minimum of €200 to a maximum of €1,000, depending on income. The beneficiaries will be the families of dependent workers with children and pensioners with annual incomes not exceeding €22,000.
Fund for employment and training
The decree establishes a Fund for Employment and Training financed with resources from the Employment Fund and the Fund for Underdeveloped Areas (Fondo per le Aree Sottosviluppate, FAS). The new fund was to be further defined by the Committee for Interministerial Planning (Comitato Interministeriale per la Programmazione Economica, CIPE) within 30 days of the decree’s conversion into law. However, the decree does not establish the overall amount of resources allocated to this fund.
Tax relief on productivity bonuses
The new legislation extends to 2009 the experimental scheme for tax relief on productivity bonuses introduced by the ‘Agreement on work, welfare and social security’ signed by the social partners and the previous centre-left government, led by Romano Prodi (IT0710029I, IT0712029I). The decree will also increase the range of beneficiaries: employees in the private sector earning annual incomes of less than €35,000, rather than the €30,000 allowed for in 2008, will now be eligible for the tax relief. Moreover, the amount of the bonus to which tax relief applies will also be increased, from €3,000 to €6,000.
However, the provision concerning tax relief on overtime earnings, also envisaged in the agreement with the previous government, will not be renewed.
Social shock absorbers
The social shock absorbers are extended to workers in economic activities not covered by the standard shock absorbers, such as retail trade and tourism, as well as to project workers, temporary agency workers and apprentices. Project workers, in particular, will be eligible for a one-off payment or ‘una tantum’ equal to 10% of their pay in the previous year if they have worked on a single-contract basis in ‘crisis’ sectors or regions for at least three months without contributions being paid for at least two months.
Easing tax on businesses
The decree envisages measures to ease the fiscal burden on companies, such as increased tax deductibles and reduced tax advances, the revision of reference earning parameters and the payment of value-added tax (VAT) on invoicing.
Faster government payments
Furthermore, the new law includes measures designed to accelerate the payment by the public administration of bills outstanding to companies.
The decree comprises further measures concerning, for instance, investment in infrastructure, variable rate mortgages for first home buyers, a freeze on the tariffs of certain essential public services, and public subscription to special bank bonds issued to finance investments by families and businesses.
Reactions of social partners
Although the three main trade unions have welcomed the attempt to extend the social shock absorbers to the categories of workers currently excluded from them (apprentices, project workers and temporary agency workers), they regard the government’s measures as insufficient to deal with the effects of the economic crisis. The Confederal Secretary of the Union of Italian Workers (Unione Italiana del Lavoro, Uil), Palo Pirani, has declared that the resources allocated by the decree are inadequate and less than those recommended by the European Union. Meanwhile, Giorgio Santini of the Cisl national secretariat has called on the government to allocate specific funds to the south of the country.
Action by the trade unions, however, has not been united. Cgil has been especially critical of the government’s management of the crisis and announced a four-hour general strike for 12 December 2008. It also published its own six-point ‘anti-crisis’ plan (in Italian) whereby the government would commit about 1.5% of GDP between 2008 and 2009, 0.7% of which would be forthcoming within the year. The Cgil plan envisages the following provisions:
- the creation of a joint government and social partner committee to manage the emergency;
- access to the social shock absorbers to be extended to all categories of workers – especially those on fixed-term employment contracts and freelancers – with economic appropriations;
- measures to support incomes and pensions through tax abatement on the bonus ‘thirteenth-month’s’ pay and reform of the system used to calculate pension increases;
- large investments in education and research – areas where funding has been cut, provoking a general strike in October 2008 (IT0810059I) – and in infrastructure;
- reorganisation of the welfare system to extend its coverage particularly with regard to young people, children and disabled persons;
- measures to regularise immigrants: in particular, suspension of the law that ties duration of the stay permit to that of the employment contract.
On the employer side, reactions to the government decree have been generally positive, albeit with some reservations concerning the amount of the resources allocated. The President of Confindustria, Emma Marcegaglia, declared that the package of measures approved by the government ‘goes in the right direction, but more money is required for companies, families and the social shock absorbers’.
Employers agree that the public should participate in recapitalising the banks through the purchase of perpetual bonds, thus constraining banks to grant greater credit to enterprises. According to Ms Marcegaglia, ‘on this front, close monitoring is necessary’. In fact, companies – particularly small and medium-sized enterprises (SMEs), which form the backbone of the Italian industrial system – fear most that the financial crisis will affect them through a credit squeeze by the banks.
However, employers have expressed their disapproval of the freeze on public service tariffs, which should instead decrease in line with the normal workings of the market.
According to the employers, moreover, action by the EU has been disappointing and may produce market imbalances with harmful repercussions for Italy. Finally, the employers believe that the European Central Bank has committed errors by increasing the cost of money in July 2008 – that is, by raising interest rates – when the economic difficulties were already evident, and by reducing these rates to an insufficient extent in recent months.
Edoardo Della Torre and Cristina Tajani, Ires Lombardia