Italy eurozone: Monti's test of strength with unions

Italy's metal-workers union Fiom has been resisting the labour reform

Italy's Prime Minister, Mario Monti, is confronting his toughest challenge since coming to power, and he has warned that he might just walk away from it all.

His proposed reforms of the job market have run into serious opposition. The biggest union confederation is incensed and calling for a general strike and a major engineering union has said it will also call a national walkout.

And earlier this week Mr Monti said that if his programme was rejected he and his government of unelected technocrats were ready to go home.

Reflecting on his task in office he said: "The objective is a lot more ambitious than just staying there.

"It's trying to do a good job. If the country, through its labour organisations and political parties, does not feel ready for what we consider a good job, we would certainly not seek to keep going."

So now around Europe new questions are being asked as to whether Mr Monti can indeed re-structure the economy in the way he wants.

And if he is not able to, what might that mean for Italy and the eurozone? Just how serious is all this?

Two tiers

The current row focuses on the government's effort to tackle what is sometimes called Italy's two-tier labour market.

Many older workers tend to be well protected by rights won by the unions at the height of their power back in the 1970s.

On the other hand, a lot of younger people struggle to find any work at all. More than 30% are unemployed.

And those who do get jobs often have to accept precarious, short-term contracts and poor pay.

The government says that this has to change; that there needs to be more flexibility if Italy is to create jobs and grow economically. It says firms should be freer to dismiss and take on staff.

Some workers, it argues, need to give up some of their rights to protection in order to make the whole job market more accessible and fairer for others.

But in the view of Italy's largest union grouping, the CGIL, the government's plans are really only about making it easier to fire people.

"These labour reforms do not create a single new job," the CGIL leader, Susanna Camusso, was reported as saying at the weekend.

"This is not going to help revive growth. Growth is a result of rigorous investment policies."

And one of the main parties in the broad coalition that has so far supported the Monti government, the Democratic Party, has close ties with the CGIL.

Room for manoeuvre

So the confrontation between Mr Monti and the union feeds directly into parliament, where the labour reforms will be debated.

For the moment it all looks very fraught. Workers ready to go to the barricades, and the government hinting about resignation.

But there may be more room for manoeuvre and compromise than there might at first appear.

Professor James Walston, who specialises in Italian politics at the American University of Rome, says of Mr Monti's threat to walk away: "He's thrown down the gauntlet.

"It's his way of saying, knock me off my perch if you dare. And when he says 'I'm not in it just to stay in power' he actually means that."

But Professor Walston does not think that there is any real chance of the government being brought down over this.

The factions that have formed the coalition behind the government, including the union-linked Democratic Party, do not want to see the administration go.

For now, at least, the politicians are happy to let Mr Monti try to resolve Italy's economic crisis.

"The parties which support him cannot afford to pull too hard because if they really blow his house down they will take the blame and come out of it very badly," says Professor Walston.

And under pressure in recent months, Mr Monti's government has stepped back and looked for a degree of compromise on other parts of its programme, like taxi de-regulation and banking reform.

Trial of strength

It may be that, over time, it will also soften its stance on some aspects of what it wants to change in the labour market.

There may be scope for some give and take as the complexities are thrashed out in parliament over the months ahead.

There are also those who would argue that on the other side of the battleground, the union movement is not quite the force that it once was.

And, in this current dispute, parts of it have already agreed to the government's job market reforms. Large though it is, the CGIL has looked isolated.

Right now, though, the row very much goes on and Mr Monti and his team are locked in their most gruelling battle since taking office.

This is a high-profile trial of strength.

With what may be a long and grinding debate to come, there is a sense that some of the momentum has gone out of the government's programme.

And there are signs that the confrontation may be damaging Mr Monti's popularity.

One poll put his approval rating at 44%. Way down from the figures of around 60% that he has enjoyed up to now.