Social Pacts in Italy: Pact for Development and Employment (unofficially known as the Christmas Pact)

Period:  December 23, 1998

Signatory Parties: 32 organizations, representing the main employers and workers associations at national and the public administration at national and local level (central administration, regions, provinces and communes).  The Pact was signed by the Prime Minister Massimo D’Alema (DS), and the Minister of Labour Antonio Bassolino (DS).  It was also submitted to parliament — following its approval, it was published in the Gazzetta Ufficiale, as if it were a law.  Attached before the text of the pact, there is a memorandum (Protocollo) signed by the Prime Minister, the overall representative of the regions, and the overall representative of the 8,000 municipalities, explaining why the regions, provinces and municipalities (i.e. the different territorial levels of the public administration) signed the pact.

Goals of the Pact: This pact was aimed at spurring economic growth and employment (see the Premise) and reaffirmed the crucial importance of controlling inflation through the incomes policy, in line with the previous 1993 Pact.  It had ambitious long-term goals, was more a master plan of Italy’s projected development of the next ten years than a tripartite agreement on immediate targets. 

Matters dealt with: More than 200 different subjects, most of which deal with public administration reform at all levels.

Background: Reaching the Pact was not something that could be taken for granted.  In Spring 1998 Italy was admitted into the first groups of EURO countries.  The relations between the government and the social partners showed tensions throughout 1998, especially when the far left Communist Refoundation Party, threatened  to withdraw from the government coalition led by Romano Prodi  unless a new law creating a 35 hour work week was approved. The social partners saw this move as an interference with the concertation system.   The situation was stalled.  In the Summer of 1998, the then Treasury Minister Azeglio Ciampi launched the proposal of a new social pact.

Institutions involved: No tripartite institution was involved in the signing of the Pact (note: the CNEL, is a tripartite body – but of a particular kind, consisting of members from the social partners and of experts named by the government).  However, CNEL is the institutional body where two meetings per year are held to discuss the incomes policy).

Summary: The Pact consists of 72 articles (38 pages long, including the 6 attachments) divided into three main chapters:

1) A Premise, in which the government and the social partners confirm that their joint purpose is to control inflation and the deficit, complying with the convergence criteria established by the EU, as the only viable way to obtain a decrease in unemployment and a growth in employment.  The government commits itself to simplify the excessively law-regulated public administration bureaucracy, in line with the Bassanini reform.

2) The method of concertation that the pact will follow is described in detail: it will be organized by territorial levels, in line with the public administration reform (regional, provincial and municipal governments commit themselves to use the territorial concertation with the social partners as a method to create synergies  aimed at promoting development and employment).  The structure of the concertation  is made up of 2 parts:

1. for matters of social policy implying government expenditures, the pact provides for an advance discussion between government and the social partners, with the government taking the final decision. 
2. for the remaining matters, after the advance discussion with the government, the social partners may decide to start a bi-lateral negotiation to settle their joint interests. 

The government also affirms that the concertation  method will be followed for the incorporation of the EU Directives into the Italian legislation (on this, see comments below).  In Chapter 2 there is also a description of the system monitoring the implementation of the pact, in which the monitoring schedule is linked to the DPEF document (government advance report on the upcoming budget law, in May) and the budget law submission to parliament for approval (in September).

3) Policies for development and employment.  The document goes into details, mentioning critical points  and promoting

• the relaunching of public investments;
• specific measures for the South, including tax relief, cuts in social security contribution for newly hired workers and for Southern young workers;
• measures to help enterprises to emerge from the underground economy (contratti di riallineamento);
• government support to local development measures, such as territorial pacts, area contracts, etc; promotion of Sviluppo Italia as coordinating agency;
• in the field of Education, Vocational Training and Research, the government committed itself  to present the School master plan, defining  the new school cycles and their contents.  In the field of vocational training, the government designed in the pact an integrated educational system, according to which those who do not attend secondary high school are obliged to attend vocational training courses up to 18 years of age.

The document had also 6 attachments.  

Attachments: Attachment 1 addresses  the simplification process of the public administration; among the most important measures introduced was the "one stop system" (sportello unico). For example, to start up a business, entrepreneurs will apply for the necessary various permits to just one office, where previously it had been necessary to apply to more than 10, so that the time required will decrease. Other important measures were the simplification of administrative documentation (for example, in Italy, the birth certificate and the death certificate in Italy used to have an expiration date) with greater resort to the auto-declaration system and the setting up of a computerized  communication system among different sectors of the public adminstration.

Attachment 2 sets forth EU Structural Funds Programming, in line with the objectives of the Pact.

Attachment 3 designs the integrated system of education, vocational training and research (very detailed). It is a really extended action plan, requiring years to be implemented.  The last section of the attachment is devoted to the definition of active labour market policies, mainly focussing on the enhanced role of vocational training.

Attachment 4 concerns human resources and public administration.  Basically, it describes the actions to be taken to make the public administration capable of catching up with the changes envisaged.  The cost foreseen for these actions was indicated.

Implementation:

a) Employment/labour market. Most of the measures were included in the 1999 budget law, in the budget laws of the following years, or in connected regulations ( for instance the so called contratti di emersione to help enterprises to come afloat from the underground economy).  In April 2000 some measures concerning the labour market reform and active labour policies were implemented (decentralization of employment services, hiring services liberalized).  New rules were introduced to define eligibility for unemployment benefits.   Job Counselling was NOT implemented.  The reform of the "shock absorber" tools (unemployment benefit, wage supplement fund, maternity leave, etc) is still pending.  According to some critics (Marco Biagi),  operational delays in certain regions are particularly serious (job counselling, for instance).  Also, the territorial pacts (more than 300) that were signed from 1997 up to now, can be considered a follow up of the December 1998 Pact.  However, most of the territorial pacts and area contracts created only a modest increase in employment.  Another agreement was signed in December 1999 between the three major union organizations representing temporary workers and the association representing temporary agencies (commitment to provide vocational training to workers, 4% contribution to finance the vocational training fund, extension of temporary contracts to low qualified workers). 

The reform of the educational and vocational training systems followed a difficult path: The so-called vocational training master plan was approved in July 1999, including new rules for apprenticeship, and the raising of the compulsory schooling age up to 18 years.  The obligation for youngsters to continue school (or vocational training courses) up to 18 years of age has been maintained.  The so called training internships were introduced.  The educational reform (providing for new school cycles) was partly implemented but then was dismantled by the new center-right Berlusconi government that went into power in May 2001.  Also, in the three years following the 1998 Pact, the social partners cooperated with the government in the preparation of the Employment National Plan to present to the EU Commission, as required by the Luxemburg process. 

b) Macroeconomic balance. The projected inflation rates included in the end-of-the year budget laws were in line with the inflation trends in the EURO area (although conflicting views on the inflation level to be taken into account were expressed by the social partners in the last 2 years).  The labour cost and the social security contributions for firms were reduced, but not as much as employers wanted.  They claimed that they needed lower social security contributions in order to compete in the new EURO labour market.  The pension reform is still pending, due to the unions reluctance to engage in a negotiation with the Berlusconi government. 

c) Social dialogue/concertation. The rules on concertation agreed in the 1993 Pact were reconfirmed in this pact: the two meetings per year (between government and social partners) on incomes policy regularly take place every year.  The meetings are held at CNEL, the tripartite constitutional body. 

Comments: The pact, in its detailed description of the countries weakness, and of the actions to undertake, shows that government and social partners were fully aware of what was at stake, what were the real problems impeding the economic growth, and how they should be addressed.  The integrated system of actions, laws, public administration reforms, collective bargaining described in the Pact were intended to launch a process that would stimulate economic development.  However, it may also be seen as a wish list, as it was too ambitious.  Some aspects of the pacts negatively influenced its outcome.  For instance, too many signatory parties were involved, coordination and monitoring were major problems in the following years, and delays in one sector had repercussions in other sectors. 

The pact was the highest institutional form ever reached by the method of concertation in Italy.  Concertation is defined (Chapter  2) as the method of sharing goals of economic and social policy between the government and the social partners, granting the latter autonomy and accountability.  Its foundations are the aknowledgment of the parties’ prerogatives and the respect of the constitutionally protected rights.  The Pact was also a source of political tensions. For instance, the referenda promoted by the Radical Party in 1999, most of which were labour related and aimed at making the labour market more flexible were not agreed to by the unions, while were supported by the major employers association Confindustria.  Since then, the relations among the three major confederations has deteriorated.

The new Berlusconi government is now dismantling the social dialogue/concertation system laid down in the 1993 and 1998 pacts, leaving unions a very modest and irrelevant role.  For this reason, major reforms such as the pension reform are still pending.  A general strike against the government policy is scheduled for March, 23 2002.

Link to the full text: http://www.cnel.it/archivio/contratti_lavoro/accgov.asp