Monti and Rajoy cross the labout market Rubicon

Summary

• The governments of Mariano Rajoy in Spain and Mario Monti in Italy have both announced significant programmes of labour market reform as part of their economic reform agendas. Monti has this week announced he will seek change without the support of Italy’s largest union.
• Both Monti and Rajoy have chosen totemic targets: Italy’s Article 18 statute on worker dismissal and Spain’s national and sectoral collective bargaining rules. These are arguably the most significant reforms in either labour market for a generation.
• Monti in particular, with no clear political base, faces a tough parliamentary fight with Italy’s largest union to secure the reforms. He may find himself squaring up to a conservative electorate and even the Catholic church.   
• Despite their political potency, for international investors, neither set of reforms will dramatically transform the inward investment conditions in Spain or Italy when set against wider competiveness issues around labour costs, skills and productivity.