Delicate Balance of Power

ROME

Last December, the overseers of Italian industry were at an impasse with labor unions over a new contract for nearly 2 million metalworkers. From auto parts plants to steel mills, Italy's factories were under assault from competitors in low-wage countries such as Poland, Turkey and China. Keen to limit costs, management was offering raises of about 3.6 percent.

Guglielmo Epifani scoffed. As secretary general of the Italian General Confederation of Labor, the largest and most militant trade union in the country, he had the power to shape the terms. The metalworkers contract was a benchmark for all of Italy and much of Europe. They were seeking a wage increase of nearly 8 percent. Epifani opted for war: He called the heads of the two next-largest trade unions and together they mobilized a one-day national strike.

About 90 percent of his membership took part, crippling factories throughout the country. In the streets of the capital, Epifani led 150,000 people in a raucous demonstration. In January, the employers reluctantly assented to a 6.3 percent pay raise -- more than double the rate of inflation.

The deal dismayed the European Central Bank, which had been urging "salary moderation." In corporate boardrooms, the contract was perceived as another sign of the old-world thinking that still grips the wealthier countries of Europe, Italy in particular, as they struggle to insulate workers from the inevitable forces of globalization.

Epifani shrugged. "Industrial labor needs to be paid for," he said in an interview. "People are not merchandise. We can't only pay attention to the interests of business and markets. We need to pay attention to the interests of the worker as well."

As capital slips eastward in search of lower costs, European trade union bosses such as Epifani occupy a crucial fault line. Proponents of unfettered capitalism blame him and the massive labor power he marshals for perpetuating economic malaise. Italy's economy suffered recession in much of 2004 and did not grow last year. Unemployment remains at about 8 percent. As Italian companies portray it, Epifani and his union stand in the way of their success, preventing them from adjusting to changing conditions by firing workers, altering hours and boosting production.

"In Italy, we have a cultural problem," said Luca Cordero di Montezemolo, the president of Ferrari SpA and the head of the Italian Employers' Association, which negotiates national contracts with trade unions. "We don't understand how quickly the world is changing. We work few and little. Without reforms, we cannot compete."

Epifani maintains that he and the unions are being cast as scapegoats for Italy's broader problems. Too many large companies are still owned by traditional families lacking management skills and an appetite for risk. The banking system is weak and the government is without vision, he said.

"We can't hide from reality," Epifani said. "Transformation is inevitable. The problem is, how are we going to govern it? People are losing their jobs. We don't want to abandon them. You need time. It needs to be gradual."

By bearing and background, Epifani, 55, seems an unlikely leader for Italy's most combative trade union, known as CGIL. A former university lecturer with a philosophy degree, he has never worked as a blue-collar laborer. He dons shiny silk neckties and a gold Longines watch. He likes the verse of Baudelaire, waxes lyrically about wine -- "more than drinking it, the terrain and culture that produces it" -- and he adores the experimental jazz of John Coltrane.