MNI INTERVIEW: Italian Union Wants Pay Rises Above Core CPI

Italy’s biggest industrial union will call for wage increases at a level above core inflation, arguing that energy accounts for 75% of the current surge in prices, one of its senior officials told MNI, warning of a danger of social unrest as purchasing power is eroded.

While accepting that full inflation adjustments might be impossible, Gianna Fracassi, Deputy Secretary-General at the Italian General Confederation of Labour (CGIL), said the war in Ukraine has “deeply changed” inflation expectations and the economy is heading toward a “structural inflationary trend.” People on lower incomes and pensions need help or else social unrest could be unleashed, she added.

Public sector wage increases negotiated several months ago have already been “eaten” by inflation, Fracassi said, calling for bigger raises next time. The EUR20 billion in aid announced by the government in recent weeks to mitigate the effect of higher energy prices has either gone to companies or to cut the price of fuel, whereas many lower earners do not have cars, she said.

“Social unrest is maturing but there is a risk that it could explode in the next few months”, said Fracassi, noting that 85% of Italian workers earn less than EUR35,000 a year, with the large majority taking home from EUR20,000-22,000.

Calling for the government to act to boost wages or else cut taxes for lower-earners, Fracassi noted that the union had had no contact with Prime Minister Mario Draghi since a general strike in December.

Her comments highlight pressure to boost spending on Draghi's government, which is also facing calls from building companies to raise more cash for tens of billions of euros worth of EU-funded projects. (See MNI INTERVIEW: Italy Must Pay More For EU-Funded Projects)

PRESSURE ON GOVERNMENT BUDGET

The broad nature of Draghi’s coalition makes it difficult for it to respond to the energy price crisis, she said.

“The government struggles a lot to keep its unity, and so has no margin for social dialogue,” she said.

The government needs to boost spending and run a bigger fiscal deficit, the union leader said, dismissing as insufficient what sources have told MNI will be a EUR7-8 billion additional aid package to be announced next week.

“All the political parties are asking for an extension to the budget. I think the government will end up giving in,” she said.

Italian workers have been losing purchasing power for years, Fracassi said, adding that the government should also be concentrating on maintaining the welfare state and speeding up the green energy transition instead of boosting defence spending as planned by Draghi. The populist Five-Stars Movement and the right-wing League, both big parties in Draghi’s coalition, share the union’s concerns about defence spending plans.