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Italy's technocrat prime minister, Mario Monti, came to office less than five months ago as the country's finances were in a tailspin. And now he could be facing his toughest challenge yet — pushing through changes to labor regulations.

Italian labor rules ensure job security for older workers but can condemn the younger generation to a series of insecure, temporary jobs.

Since taking office, Monti has pushed through a round of tough austerity measures, budget cuts, pension reform and some deregulation.

Now he's tackling the third rail of Italian politics — restructuring the labor market.

His government negotiated at length with organized labor, but no agreement was reached on a draft bill. And workers have been taking to the streets throughout the country.

Taking On An 'Untouchable Symbol'

The biggest bone of contention is Article 18 of the workers' statute in Italy. It dates from 1970 and was organized labor's greatest triumph after years of tense industrial relations.

The law says that if a court finds that a worker at a company with more than 15 employees has been unfairly dismissed, the worker must be reinstated.

Employers say that by making it so hard to fire workers, the law essentially ensures job tenure and is the main cause of decades of economic stagnation.

Political analyst James Walston says the number of workers who actually resort to Article 18 is very small.

"Employers maintain that just the presence of this article frightens off investors. The unions say it is a fundamental protection. Both are fighting over symbols," Walston says.

For many Italians, Article 18 is an untouchable symbol. The last two attempts to change it ended in tragedy. Ten years ago, the academic behind the reform was shot dead by a leftist terrorist group. Three years earlier, the same thing happened to another academic working on employment reform.

Italy's Youth Suffer The Most

But the real problem of the Italian economy, many analysts say, is a decade of stagnation and the growth of a two-tier labor market.

While older workers have permanent job contracts with generous pensions, the younger generation can only hope to get a temporary contract with no benefits and no security.

The jobless rate among young Italians is more than 30 percent.

Paolo Falco, a 27-year-old economist who left Italy and found employment at Oxford University in England, says unions should stop focusing on Article 18.

"They should focus on young workers with temporary contracts. And please, do not sell us out again as the unions did in the past in order to protect their older members," Falco says. "That's what led to this two-tier system and unacceptable inequality."

Susanna Camusso, leader of Italy's biggest trade union with some 6 million members, acknowledges that for too long organized labor ignored the problem of young workers exploited thanks to temporary contracts.

But she accuses the government of making workers, young and old — rather than wealthy Italians — bear the biggest brunt of its reforms.

"This is creating a wider gap between rich and salaried workers. And with growth and investment policies constantly being postponed, new jobs are not being created and unemployment is growing," says Camusso, the head of the GCIL trade federation.

Are Labor Law Changes Enough?

Camusso has already announced a general strike in May to protest changes to Article 18.

Along with making it easier to hire and fire, the government's bill includes pension and unemployment benefits also for short-term contracts.

Yet with Italy in its third year of recession, skepticism is widespread. Most Italians do not believe the changes are going to create jobs and growth — a recent poll found 67 percent oppose the measure.

But Prime Minister Monti is standing firm.

"Italy's recession is caused not only by the broader international economic crisis, but also by long-delayed structural reforms," he said. "We are determined to continue along this reformist path."

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