Italy's Government Cracks Down on Short-Term Work Contracts

(Bloomberg) -- Italy's populist government approved a law that makes it harder to put employees on short-term contracts, the Cabinet's first legislative initiative after taking office last month.

The wide-ranging law, passed late Monday, includes plans to penalize some companies that leave Italy after receiving state aid, and limits gambling advertising on the internet.

“With this decree we are seeking to demolish previous laws that increased job insecurity," Labor Minister Luigi Di Maio said during a press conference before the approval.

Markets took the passage of the decree in stride. The FTSE MIB benchmark stock index rose 0.7 percent as of 9:06 a.m. in Milan, while the yield spread between Italian 10-year bonds and similarly dated German bunds narrowed 3 basis points to 231 basis points.

The final version of what is called the “dignity decree” was watered down from Di Maio's initial proposal after pressure from Finance Minister Giovanni Tria to avoid burdening the country's already tight budget.

According to the law, companies that received state support to develop their business in the five years prior to the decision to move out of the country could be fined up to four times the amount of the aid.

Other initiatives include a limit on the number of times that employers are allowed to renew a short-term contract and adds new safeguards for workers.

The law still needs approval by Parliament to become final.

--With assistance from Dan Liefgreen and Ross Larsen.

To contact the reporter on this story: Chiara Albanese in Rome at calbanese10@bloomberg.net

To contact the editors responsible for this story: Jerrold Colten at jcolten@bloomberg.net, Kevin Costelloe

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