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Italy has removed some flexibility from its labour market by scrapping vouchers issued as payment for temporary work, in a victory for the country’s largest trade union but a defeat for business.
The move by Paolo Gentiloni, the prime minister, was intended to avoid a referendum on the vouchers, scheduled for May, which could have reignited political tensions in Italy and possibly dealt a setback to his centre-left government.

“Italy did not need an electoral campaign on these issues in the coming months,” Mr Gentiloni said after the cabinet approved the decision. He added that the vouchers were “the wrong answer” to employers’ needs.

The vouchers, worth €10 each, have been used by companies and households as a convenient way to pay casual and part-time workers. More than 130m were used in 2016, a 24 per cent rise on the previous year.

But the vouchers – introduced under the centre-right government of Silvio Berlusconi in 2003 — had become a symbol of precarious, short-term work, triggering opposition. Susanna Camusso, the leader of the Cgil union, welcomed the government’s decision to scrap them. “This is a great result, it was exactly our goal with the referendum,” Ms Camusso said.

The government’s decision on the vouchers could raise concerns that Italy is backtracking on the reformist agenda of Matteo Renzi, the former prime minister who resigned in December.

Mr Renzi had passed a landmark labour market reform in 2015 which made it easier to fire certain workers, taking a key step in the direction of a more flexible jobs market, but he also introduced a new form of permanent contract which was designed to cut down on precarious work. The 2015 reform kept the vouchers in place, but made it easier to track them and set some new guidelines for their use.

Vincenzo Boccia, the president of Confindustria, Italy’s biggest business group, had said the elimination of the vouchers was “very disappointing”. “Dismantling things without a debate does not seem the right path”, he said. “We could have just voted in the referendum.”

Some opposition lawmakers expressed concern that the end of the vouchers could boost the underground economy.

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