Bank of Italy Governor Mario Draghi on Saturday called on Italy's trade unions to accept that competition and merit should take a role in public sector contract negotiations.
In a keynote speech in the northern Italian city of Turin, Draghi noted that public sector pay gains had recently outstripped those of the private sector and failed to reward productivity. "We need to introduce adequate systems of individual assessment and differentiation," Draghi said in his annual speech to Italian market analysts and traders.
In both the public and private sector "it is to be hoped that the actions of the social partners (unions and employers) lead to an increase in productivity and employment growth," he said. Italy's productivity has lagged far behind its euro zone partners in recent years and its unit labour costs have risen. It has been one of the slowest growing economies in the area for at least a decade.
Italy must take advantage of the current economic recovery and surprisingly strong tax revenues to cut public spending, make structural reforms and aim for a balanced budget, Draghi said. "The temptation must be resisted to spend lightly the unexpected increase in tax revenues," he said, calling on Italy to "significantly reduce its public debt quickly." Italy's debt pile is the highest in the euro zone, but there have been calls from members of Romano Prodi's centre-left ruling coalition to use the surge in revenues, up more than 11 percent in the first 10 months of last year, to quickly cut tax rates.
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