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‘A million more unemployed’: Fears as Italy’s Covid freeze on layoffs set to end

Italy is the only European country to ban companies from laying off staff amid the pandemic. But mass job losses are expected across the country as the freeze comes to an end in June.

'A million more unemployed': Fears as Italy's Covid freeze on layoffs set to end
Photo: Filippo Monteforte/AFP

Trade unions in Italy are warning of a “social tsunami”, as they say the freeze saved thousands of jobs after the pandemic plunged Italy into deep recession – but the European Union has been disparaging, and employers are angling for its end.

Companies were first banned from sacking workers under former premier Giuseppe Conte in February 2020, when Covid-19 sparked Europe’s first nationwide lockdown in Italy. The measure, which is unique in Europe, was later extended.

READ ALSO: Italy to spend 40 billion more to help virus-hit economy

When Mario Draghi became prime minister in February this year, he said the government “should protect workers… but it would be a mistake to protect all economic activities equally”, saying there must be a “choice”.

The freeze is due to expire at the end of June for the biggest companies, notably in industry and construction, although small and medium-sized firms, particularly in services, have until the end of October.

The European Commission this month denounced the Italian ban on layoffs as “counterproductive” as it protects employees on long-term contracts but not those in more precarious jobs – notably women and young people who have so far felt the brunt of the economic problems in Italy.

READ ALSO: ‘Left behind’: Why are so many women unemployed in Italy – and what’s being done about it?

Photo: Anna Monaco/AFP

It asserted that in France and Germany, which instead offered financial support for people whose hours were cut by struggling companies, the effects of the pandemic on employment have been less severe than in Italy.

The members of Draghi’s coalition government, who rallied around the former European Central Bank chief after Conte’s government collapsed, are divided on the subject.

The biggest party in parliament, the Five Star Movement, has echoed trade unions in calling for a further extension of the layoff ban for everyone, and Labour Minister Andrea Orlando, from the centre-left Democratic Party (PD), last month raised the prospect of an extension under certain conditions until August, before back-tracking under pressure from employers.

‘A million more unemployed’

The minister for economic development, Giancarlo Giorgetti, a member of the League, has instead proposed extending the freeze for the hardest-hit sectors, such as textiles.

The fear is that Italy could face a wave of redundancies when the ban ends.

“The most realistic estimates point to 70,000 to 100,000 layoffs, which is certainly not negligible, but is not enormous,” Francesco Seghezzi, head of the Adapt Foundation, which specialises in research on employment, told AFP.

Trade unions fear the numbers could be much higher, warning of “a million more unemployed”, while the Bank of Italy estimates 440,000 jobs were saved in 2020 thanks to the rule.

Despite the ban, there were 550,000 layoffs in Italy in 2020, as those related to disciplinary issues or the closure of companies were exempt.

There are also hundreds of thousands of workers in more precarious jobs whose contracts were not renewed.

In total, almost a million jobs were lost last year in Italy.

READ ALSO:

The unemployment rate reached 10.4 percent in the first quarter of 2021, the highest since the beginning of 2019. Among the 15-24 age group, it rose to 39.2 percent for women and 32.7 percent for men.

But the economy is now picking up steam once again and some sectors such as manufacturing and construction are instead struggling to find staff owing to a lack of skilled recruits.

Almost 1.3 million jobs, most of them temporary, need to be filled between June and August, according to the Union of Chamber of Commerce (Unioncamere).

“The signs of economic recovery are so encouraging that the lifting of the ban on layoffs could have a less dramatic impact than initially feared,” David Benassi, professor of sociology at the University of Milano-Bicocca, told AFP.

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ENERGY

What does the shut-off of Russian gas supplies mean for Italy?

After Russian energy giant Gazprom suspended gas deliveries to Italy on Saturday, many are wondering what consequences the stoppage will have on the country’s energy supplies.

What does the shut-off of Russian gas supplies mean for Italy?

What’s going on?

Over the past three days, Italy has received none of the gas supplies it expected from Russian energy giant Gazprom. 

The impasse officially started last Saturday, when Gazprom announced it would not be able to deliver gas to Italy due to “the impossibility of gas transport through Austria” – Russian gas supplies are delivered to Italy through the Trans Austria Gas pipeline (TAG), which reaches into Italian territory near Tarvisio, Friuli Venezia-Giulia. 

READ ALSO: Russia suspends gas to Italy after ‘problem’ in Austria

Though Gazprom originally attributed the problem to Austrian gas grid operators refusing to confirm “transport nominations”, Austria’s energy regulator E-Control said that the Russian energy mammoth had failed to comply with new contractual agreements whose introduction had been “known to all market actors for months”. 

Additional information about the incident only emerged on Monday, when Claudio Descalzi, the CEO of Italy’s national energy provider ENI, said that supplies had been suspended after Gazprom failed to pay a 20-million-euro guarantee to Austrian gas carrier Gas Connect. 

Descalzi also added that ENI was ready to step in and deposit the guarantee itself in order to unblock deliveries to Italy.

Logo of Italian energy regulator ENI.

Italian energy regulator ENI said it was ready to pay Austrian gas carriers a 20-million-euro guarantee to unblock deliveries. Photo by Marco BERTORELLO / AFP

READ ALSO: Italy’s ENI ready to pay guarantee to unblock Russian gas

At the time of writing, however, no agreement between ENI, Gas Connect and Gazprom has yet been reached, with the stoppage expected to continue until Wednesday at the very least.

What would an indefinite stoppage mean for Italy’s upcoming winter season?

Though energy giant ENI appears to be confident that a compromise between all the involved parties will be reached shortly, the “indefinite shutdown” of the Nord Stream 1 pipeline in early September is somewhat of a menacing precedent. 

After fears of a long-term supply suspension cropped up over the weekend, outgoing Ecological Transition Minister Roberto Cingolani publicly reassured Italians that “barring any catastrophic events, Italy will have the whole of winter covered”.

It isn’t yet clear what exactly Cingolani meant by “catastrophic”, but the latest available data seem to suggest that Italy wouldn’t have to resort to emergency measures, chiefly gas rationing, should Gazprom halt deliveries indefinitely. 

Italian Minister for Ecological Transition Roberto Cingolani.

Outgoing Minister for Ecological Transition Roberto Cingolani said that, “barring any catastrophic events”, Italy will have enough gas supplies for the winter. Photo by Andreas SOLARO / AFP

In 2021, prior to Russia’s invasion of Ukraine, Italy received around 20 billion cubic metres of Russian gas per year, which accounted for about 40 percent of the country’s annual gas imports. 

But, thanks to the supply diversification strategy carried out by outgoing PM Mario Draghi and his cabinet over the past few months, Russian gas currently accounts for, in the words of ENI’s CEO Claudio Descalzi, only “about nine to 10 percent” of Italian gas imports.

READ ALSO: Italy’s Draghi criticises Germany over latest energy plan

Granted, Italy still receives (or, given the current diplomatic deadlock, expects to receive) a non-negligible total of 20 million cubic metres of Russian gas per day. But, should supply lines between Rome and Moscow be shut off until further notice, Italy could fall back on existing gas stocks to meet winter consumption demands. 

Last Wednesday, Cingolani announced that the country had already filled up 90 percent of its national gas stocks – Italy has nine storage plants for an overall storage capacity of 17 billion cubic metres of gas – and the government was now working to bring that number up by an additional two or three percentage points.

These supplies, Cingolani said, are set to give Italy “greater flexibility” with respect to potential “spikes in winter consumption”.

Gas storage station in Loenhout, Belgium.

Italy has nine storage plants for an overall storage capacity of 17 billion cubic metres of gas. Photo by Kenzo TRIBOUILLARD / AFP

Finally, Italy is expected to receive an additional four billion cubic metres of gas from North Europe over the winter months – deliveries which will be complemented by the first shipments of LNG (Liquefied Natural Gas) from Egypt.

Both of these developments are expected to further reinforce Italy’s position in the energy market for the cold season.

What about the long-term consequences of an indefinite stoppage?

An indefinite shut-off of Russian gas supplies would effectively anticipate Italy’s independence from Moscow by nearly two years – Draghi’s plan has always been to wean the country off Russian gas by autumn 2024.

However, the Italian government’s strategy is (or, perhaps, was, as a new government is about to be formed) centred around a gradual phasing out of Russian supplies. As such, although not immediately problematic, a ‘cold-turkey’ scenario might create supply issues for Italy at some point during 2023.

READ ALSO: EXPLAINED: How much are energy prices rising in Italy this autumn?

Granted, Algeria, whose supplies currently make up 36 percent of Italy’s national demand, is expected to ramp up gas exports and provide Rome with nine billion cubic metres of gas in 2023.

But, even when combined with LNG supplies from several African partners – these should add up to a total of four billion cubic metres of gas in 2023 – there’s a risk that Algerian gas might not be able to replace Russian gas on its own.

An employee works at the Tunisian Sergaz company, that controls the Tunisian segment of the Trans-Mediterranean (Transmed) pipeline, through which natural gas flows from Algeria to Italy.

Algerian gas supplies, which reach Italy through the Trans-Med pipeline (pictured above), might not be enough to replace Russian gas in 2023. Photo by Fethi BELAID / AFP

Therefore, should an indefinite shut-off be the ultimate outcome of the current diplomatic incident between ENI, Austria’s Gas Connect and Russia’s Gazprom, Italy, this time in the person of new PM Giorgia Meloni, might have to close deals with other suppliers or ask existing suppliers to ramp up production. 

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