Italian Premier Mario Monti will hold a crunch meeting with trade unions and business associations on Tuesday to try to find an agreement on measures to reform the labour market.
Monti's government of non-political technocrats wants to introduce changes to boost productivity and make it easier for women and young people to find work.
The main point of contention is whether to change Article 18 of the 1970 Workers Statue, a law that forbids companies with over 15 employees from firing people without just cause.
Monti has argued that this law makes firms reluctant to hire new staff on regular contracts, which has led to a situation in which almost one in three 15-to-24-year-olds are unemployed while many others have work contracts that offer them few rights and little job security.
He once said there is a sort of "apartheid" in the Italian labour market in which older workers often have a high level of protection while young people have virtual none. So the government argues that it is necessary to make it easier for firms in economic difficulty to dismiss staff, as this would actually encourage companies to hire, while boosting benefits for people out of work.
Italy's main unions, however, have remained opposed to changes that would make it easier for firms to put workers on the dole in a series of talks with the government this year.
Labour Minister Elsa Fornero has said that, if the government fails to reach an agreement with the unions and business representatives, it will press ahead and present a package of reforms to parliament anyway.
Italian President Giorgio Napolitano tried to nudge the interested parties to find some common ground, saying on Monday that failure to reach an agreement would be "grave".
Labour reform is widely seen as being a key test for former European commissioner Monti, who took over the helm of government when the financial crisis forced Silvio Berlusconi to step down as premier in November.
Monti's government passed a 30-billion-euro austerity package to put Italy's public finances in order in December and so far this year it has presented a series of liberalisations and red-tape-cutting measures aimed at boosting growth.
But tackling the unions over Article 18 is considered by many to be the biggest challenge yet. photo: Italian Premier Mario Monti (right) and Labour Minister Elsa Fornero
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