October 7, 2014 / 2:18 PM / 3 years ago

EU leaders to meet on jobs as budget disputes loom

4 Min Read

Italy's Prime Minister Matteo Renzi addresses the 69th United Nations General Assembly at the United Nations Headquarters in New York September 25, 2014.Mike Segar

MILAN (Reuters) - Italian Prime Minister Matteo Renzi has persuaded European partners to attend a meeting on jobs in Milan on Wednesday but he may struggle to get them to agree to do much more than show up.

Originally presented as a summit and later downgraded to a "high-level conference", the encounter is meant to help develop a response to the jobs crisis, especially among the young, that is hitting southern European countries particularly hard.

Unemployment in the eurozone is near record levels. Figures for August showed more than 18 million people were out of work or about 11.5 percent of the working population. The figures are particularly high in southern Europe and among young people, of whom about a quarter are unemployed.

German Chancellor Angela Merkel and French President Francois Hollande are both due in Milan but no concrete measures or conclusions are expected from the meeting which comes only weeks before the same EU leaders are due to meet in a full European Council in Brussels.

Scheduled to last only three hours, the meeting was confirmed only after much confusion, with a succession of statements from various European capitals announcing first that it had been canceled and then that it was going ahead.

Officials said the meeting would be a "stock-taking exercise" to keep up momentum on measures such as the Youth Guarantee Scheme, an EU-wide initiative aimed at helping people under the age of 25 into work.

For Renzi, fighting heavy domestic opposition to plans to change some hiring-and-firing rules for workers on permanent contracts, the meeting will provide a platform for his calls for a more expansive interpretation of European Union budget rules to stimulate the stagnant eurozone economy.

Italy wants to discuss Europe-wide action to boost investment, to prepare the ground for possible concrete measures to be weighed at the EU summit scheduled in December.

But it risks highlighting a split between countries like France and Italy, pressing for budget flexibility, and Germany, which says countries must cut spending and pass reforms.

France and Italy have both announced they will not meet their budget goals this year and next, while German Finance Minister Wolfgang Schaeuble has made it clear Berlin believes there is not much scope for measures to stimulate demand.

Eurozone officials say France's draft 2015 budget, which foresees Paris missing its EU budget promises, is likely to be rejected by the European Commission.

A discussion paper circulated ahead of the meeting points to the need to match structural reforms in areas such as wage bargaining and hiring and firing rules with more investment and fiscal measures to stimulate demand.

"Recently, Europe has dealt with the causes of the crisis vigorously. It is now necessary to react with equal determination to the effects of the crisis," says the document, a copy of which was seen by Reuters.

But there is no indication of how the growing division over budget policy is to be bridged.

Facing criticism at home and in Europe that his government has failed to match its ambitious reform promises with action, Renzi is fighting to get the first stage of a long-promised Jobs Act through the Senate in time for Wednesday's meeting.

Despite stiff opposition from unions and elements of his own center-left Democratic Party, Renzi wants to water down rules that enable workers on permanent contracts to sue to get their jobs back for wrongful dismissal.

Meanwhile, data released on Tuesday has further raised concerns that Europe's largest economy is running out of steam. German industrial output plunged in August at its steepest rate since the height of the financial crisis and the International Monetary Fund cut its German growth forecast.

Additional reporting by Julia Fioretti and Robin Emmott in Brussels; Writing by James Mackenzie; Editing by Janet Lawrence

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