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Italy court blocks referendum to scrap Renzi’s labor reform

FILE PHOTO: Italian Prime Minister Matteo Renzi attends a joint news conference with U.S. President Barack Obama in the Rose Garden of the White House in Washington, U.S., October 18, 2016. REUTERS/Carlos Barria/File Photo

ROME (Reuters) – Italy’s Constitutional Court on Wednesday rejected a bid by the country’s biggest trade union to force a referendum on a labor reform enacted by former prime minister Matteo Renzi that made it easier to fire workers.

The ruling is likely to prove a relief for new Prime Minister Paolo Gentiloni, who has pledged to build on his predecessor’s reforms, and it also spares Renzi the humiliation of having his two flagship projects thrown out in referendums.

Renzi stepped down last month after losing a popular vote on constitutional changes. He flagged the 2015 “Jobs Act” and the planned constitutional reform as vital measures to revive Italy’s economy, the most chronically stagnant in the euro zone.

Big businesses had welcomed the labor reform, which scrapped a rule that gave people fired from large private sector companies the right to be re-hired if their dismissal was deemed by a court to have been unjustified.

The CGIL union, which opposed most aspects of the Jobs Act from the start, asked the court to approve a referendum on re-introducing the rule and extending it to smaller companies.

Despite rejecting the union’s request regarding the “Jobs Act”, the judges did approve two other referendums proposed by the CGIL – on the use of vouchers to pay workers who have no contract and on extending company employees’ rights in specific circumstances.

Italy has one of the lowest proportions of people in work in the euro zone and millions are so discouraged that they have stopped looking for a job. Almost 40 percent of 15-24 year-olds are unemployed.

Decades of economic stagnation have shuttered thousands of businesses and reduced job opportunities, but when the economy emerged from a three-year slump in 2015, Renzi hoped that making firing easier would prompt firms to hire.

The Jobs Act included temporary tax breaks for companies that hired workers on permanent contracts and it also aimed to make job centers more efficient, broaden unemployment benefits and give employers more power to monitor employees’ performance.

But the labor market has not so far seen the desired improvement: the unemployment rate rose in November to its highest since June 2015, shortly after the measures began to be applied.

(Reporting by Isla Binnie; Editing by Gareth Jones)

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