Italy's left government steps back from the brink

By David Bacon, 8 December 1996

[Paragraphs, lacking in the original as received, are here supplied by publisher]

ROME (11/20/96) Q Tension is rising in Europe.

Governments across the continent are bent on cutting the extensive network of social benefits workers have won since World War Two. Workers and unions resist, and both France and Germany have been rocked by this escalating conflict. In late November Italy came close. But at the last moment the country's new left-wing government stepped back from the brink. Italy's powerful union movement, the General Confederation of Italian Workers (CGIL), which had threatened a general strike, instead signed an agreement Tuesday which for the moment preserves social peace.

Italy's left-wing government, like more conservative ones elsewhere in Europe, is in the end committed to the process for European union. But the Italian experience suggests that left-wing governments may be able to convince workers to accept the conditions required, and avoid social explosions as a result. All governments in the European Community are facing a deadline next June, when under the Maastricht Treaty their deficits must be cut to 3% of their gross national product in order to join the new European currency union. The individual national currencies of participating countries will then be replaced by a common European currency, a key step in forging one of the most powerful trading blocks in the world.

None of the major European countries have yet met this goal. The conservative French government of Prime Minister Alain Juppe a year ago sought to reduce its deficit by making heavy cuts in the French public healthcare and welfare systems. It provoked the largest confrontation with French workers since 1968. A similar conservative-led effort to cut workers' vacations in Germany this year met confrontation as well. But since last May, Italy has had a left-wing government, the Olive Coalition, whose very name invokes an image of social peace. Its leading party, the Party of Democratic Socialism, was formed when the old Italian Communist Party split, following the end of socialism in the Soviet Union.

The PDS, despite its name, doesn’t view Soviet-style socialism as even a remote possibility in Italy any longer. Nevertheless, its rise to power last spring was an historic step in Italian politics. In the aftermath of World War Two, U.S. intervention forced the Communists out of the Italian government, despite their wide popularity.

For 50 years, successive governing coalitions were designed to keep them out of power. But the Italian corruption scandals of the last five years weakened the legitimacy of conservative parties. The reformed Communists, untouched by scandal, were the only political party with the strength to pull together a coalition and form a new government. The other party born of the Communist split, the Refounded Communist Party, is smaller and to the left of the PDS. It supports the government, keeping it in power with a narrow 5-vote margin.

Seeing the path chosen by the French and German governments to cut their deficits, Italian workers elected a left-wing government last spring, hoping to avoid an economic attack on them as well. So far, they have succeeded. In the debate over the budget which just concluded, the government agreed not to pass any new taxes or cut any services at this time. But in the spring, it is proposing an additional EuroTax to provide funds for cutting the budget. Five thousand billion lire will be paid by workers, and six thousand billion by companies.

A year ago, the Italian CGIL labor federation negotiated an agreement in principle with the previous government for the creation of a national jobs program. Unemployment in Italy has surged to 12%, a postwar high. In the industrial cities of Milan and Turin factory shutdowns and deindustrialization have brought unemployment to an unprecedented 6%. In the poorer, southern part of the country, over 25% of workers have no jobs. Facing the 3% deficit-cutting goal, the new government didn’t include in the budget the legislation needed to set up the jobs program.

The CGIL threatened a general strike. The federation has launched many similar strikes in its history against more conservative governments, but this would have been the first against a left-wing one it helped put in power. In round-the-clock negotiations, however, which went down to the wire, the government and the CGIL reached agreement. The new jobs program will set up Italy's first comprehensive job-training program, and will spend about 5 billion lire on creating 100,000 new jobs. In addition, in areas like the south, companies will be allowed to pay wages less than the national standard in each industry, and will receive tax incentives for job creation as well. “There are new possibilities for us now,” explains Gulielmo Epifani, CGIL vice-secretary. “It's much easier to talk to this government, because we have the same politics. Nevertheless, meeting the conditions for going into the European currency is creating great problems for us.”

Italian workers are already living under an austerity policy, which has held wage increases to less than the inflation rate for three years. Epifani believes that the sacrifice is necessary, and credits it with cutting inflation from over 7% to its current 2.3%.

Unlike U.S. unions, which negotiate wages and conditions with individual employers, Italian unions negotiate pacts with whole industries, which cover both union and non-union workers. No company tries to pay less than the agreement, but if one were to do so, it would be unable to bid on government contracts or receive any government assistance.

This year the CGIL is demanding a 2.6% wage hike. The machine-building industry, one of Italy's largest, has not agreed. An industry-wide strike seems likely. As part of the reforms moving toward economic union, the CGIL has accepted the privatization of many formerly government-owned businesses. “We know this may cause some job loss, and we want to defend the existing level of employment,” Epifani says. “But we can't always do this, since other workers wind up paying the price. In a competitive global economy, we have to accept the profit logic as a reality of life.” Workers may receive shares in some privatized enterprises, such as the phone company Italian Telecom, in exchange for the EuroTax hit.

The elephant in the closet, however, is the Italian pension system, whose eventual obligations to the present workforce is as large as the entire current government budget. Italy's birthrate is declining, with fewer workers paying into the fund each year, as the number of retirees gets larger and older. Some voices in the PDS have pointed to irrationalities in the system as a justification for making cuts. Teachers, for instance, can retire after only 19 years, while the retirement age for most laborers has gone up from 55 to 65. Italian workers who lose their jobs have extensive unemployment benefits under the system, but it provides no equivalent to U.S. welfare or social security to those who’ve never worked.

“So far our government hasn’t cut social expenses, and we will defend our system if they try to do it,” Epifani warns. The existing law governing benefits must be renegotiated in 1998, however. “Some changes may be necessary, and we'll discuss pensions then, but not before.”

Meanwhile, the more left-wing Refounded Communist Party, the Refundazione, calls for no cuts in pensions, and opposes privatization. Since the government would fall without their votes, they hold a veto power on some issues. Differences in political positions reflect developing class differences on the left as well. Some observers speculate that the Refundazione is building a new social base among young working class youth from the suburbs of Italian cities. Unlike the U.S., Italian suburbs aren’t wealthy areas, but more marginalized ones.

Many of these young people work at “black jobs,” where they don't get pension deductions or other benefits, and are paid less than the legal minimum. These conditions are legally prohibited, but they are often the only jobs employers are willing to offer. The old Italian Communist Party had its strongest support in the traditional industrial workforce. The PDS has inherited much of it.

But its base has become more middle-class, in part because many children of working-class families in Italy were able to go to free public universities, get skills, and move up the social ladder. Within the governing PDS, the party's changing composition and willingness to consider austerity measures causes doubts among some people. One veteran journalist worries that “if the left cooperates in austerity programs, there really isn’t a left anymore. Who represents the workers then?”

But others in the party say these measures are necessary if the left really wants to hold power. Sounding much like New Democrats in the U.S., they say the old PCI never really wanted to govern, and that the PDS has to move towards the center to be able to win an electoral majority. The CGIL, while led by Communists for most of its history, has a long tradition of autonomy and independence from political parties. That independence will be hard tested in the process in which the economies of European countries are becoming unified.

On the one hand, it is trying to protect Italian workers from the harsh austerity measures adopted elsewhere on the continent. But the federation is also moving towards the formation of a common front with other European labor federations. “In the long term, we must have one European trade union movement,” Epifani explains. “We can't defend workers any longer country by country. We're dealing with Europe-wide policies. If we're going to have a common European currency, we must also have a common wage policy, along with policies on unemployment and investment.”

European unions proposed a social charter, during the negotiations of the Maastricht Treaty, which more conservative governments have been loath to accept. They have also begun to coordinate their bargaining with large European corporations, trying to achieve the same working conditions from country to country. During the French general strike last year, Italian unions gave money and political support. “But we're actually very late,” Epifani says, “behind what's already happening between governments and companies. We're still talking as though we're still dealing with separate countries, while economic unification has moved well beyond this.”