Italian Bond Yields Slide After Constitutional Court Decision Avoids Early Elections

There was some modest concern early this morning that the tenure of the new Italian cabinet of Paolo Gentiloni could be short lived, following a decision by Italy's constitutional court this morning, which might have approved a referendum on worker reinstatement rights. However, those fears receded when early moments ago Italy’s Constitutional Court rejected a request by the country’s top union to hold a referendum on a key provision of the 2015 labor market reform which makes it easier for companies to fire workers and believe are victims of "unfair dismissals", handing a belated, if pyrrhic, victory to Matteo Renzi, the former prime minister who engineered the overhaul.

According to the FT, the firing provision preserved by the ruling involved the elimination of “article 18? of the Italian labor law which forced companies to rehire workers who had been unfairly sacked instead of simply compensating them. It is seen by Mr Renzi and many Italian businesses as a key structural reform in the country whose labor market is often viewed as sclerotic and unfriendly to companies looking to boost employment.

In its ruling the constitutional court said that the request for a referendum to abolish provisions on the firing measure was “inadmissible”, according to Bloomberg.

However, the court did approve a referendum on two other less important measures, including one on vouchers for short-term work, and one on employment in public contracts, which had also been pushed by Italy's largest trade union, the CGIL.

Renzi’s 2015 labour reform is often considered the cornerstone of his economic agenda, even if in the end it proved largely irrelevant and had a limited impact on the Italian jobs market in the short term. While employment has grown modestly it was introduced, unemployment has remained high as many Italians re-entered the work force but failed to find jobs. On Monday, Italy reported that its unemployment unexpectedly rose to 11.9%, the highest since early 2015, while youth Unemployment jumped to 39.4%.


The good news, if only for markets, is that since the court declined on all three referenda, that Gentiloni's cabinet will not have to face early elections, Italian BTP yields promptly dropped to the lowest level in a week.

The less pleasant news, however, for Gentiloni, is that overnight the 62 year old Italian Prime Minister Paolo Gentiloni had an angioplasty—an emergency surgical procedure to clear an obstructed coronary artery—his spokeswoman said. Mr. Gentiloni, 62 years old, felt ill late Tuesday, after returning from an official visit to France, the WSJ reported.

His spokeswoman said the operation went well and he was now awake in intensive care in Rome’s Gemelli hospital. She said it was unclear how long he would remain in hospital, but he may need to stay there for at least another couple of days, the spokeswoman said. Mr. Gentiloni, who took office in December following Matteo Renzi’s resignation, has canceled his visit to London on Thursday, when he was meant to meet British Prime Minister Theresa May.

We wish the new PM a speedy recovery, although we wonder if governing Italy is what a man in his condition needs.


No comments yet! Be the first to add yours.