News Analysis: Pension reform on pace to become another major front for Italian gov't

2021-03-04 22:36:12 GMT2021-03-05 06:36:12(Beijing Time) Xinhua English

ROME, March 4 (Xinhua) -- The newly-installed Italian government led by former European Central Bank Governor Mario Draghi is already busy fighting the country's two most pressing challenges: the coronavirus pandemic and the slow economic growth.

The country's massive and costly pension system -- an area where a generation of Italian leaders have tried and failed to make changes -- will soon emerge as a third front the Draghi government must face.

Italy has one of the oldest populations in the world and one of the world's longest life expectancies, according to data from the World Factbook and World Data, both information collating entities. Those facts combine to create an unusually large concentration on the high-end of the age spectrum.

According to World Data, Italy is also one of five countries in the world where residents under the age of 20 account for less than 18 percent of the population.

"It all creates a very challenging situation for any Italian government," Roberto Pizzuti, a professor of political economics at Rome's La Sapienza University, told Xinhua. "For every idea on how to reform the system, there is a group opposed to it."

In the meantime, the pension system is the largest single expenditure for the cash-strapped Italian government. Pension spending in Italy is high as a percentage of the country's economy at 16 percent of gross domestic product (GDP), according to data from the Organization for Economic Cooperation and Development.

In 2018, Italy developed a plan called "Quota 100," which allowed a worker to draw a pension starting at age 62 as long as the worker paid into the pension system for at least 38 years. Those two figures -- 62 and 38 -- total the "100" in the name of the plan. Workers with fewer years of contributions would have to retire at a later age, up to 67.

The plan, which was budgeted to cost 20 billion euros (23.9 billion U.S. dollars) over three years, has gone over budget and will expire this year.

Before the pandemic, the government said it was considering an early end to the "Quota 100" plan. "Instead of waiting for the natural end of 'Quota 100' at the end of 2021, it would be better to have a replacement ready to come into force at the start of 2021," Pier Paolo Baretta, then under-secretary of the Italian Treasury told reporters in early 2020.

But that strategy was ditched when the coronavirus became the government's top priority. Now, with the "natural end" of "Quota 100" approaching, the Draghi government's hand is being forced.

"There was a strategy of raising the retirement age as average life expectancy rose, but now, due to the pandemic, the average life expectancy is actually dropping slightly," Pizzuti said. "Nobody would accept lower benefits, and raising the retirement age beyond 67 is difficult. There is no clear solution."

But Roberto Ghiselli, the confederation secretary of the CGIL, Italy's largest trade union, said the government should create a reform that provides more options for workers.

"Italy needs to increase productivity, and allowing older workers to retire when they are less productive and creating a job for younger and more dynamic workers would be a solution," Ghiselli told Xinhua.

He called for retirement options to start to kick in at age 62 -- the same as with the "Quota 100" plan -- though with fewer than 38 years of contributions, and adjustments for workers toiling in particularly dangerous fields. Enditem