ROME (Reuters) – Italy’s government on Thursday approved landmark reforms to the welfare and pension system, election promises from the anti-establishment 5 Star Movement and the right-wing League, which mark a major overhaul of the state- welfare of the country.
The reforms, which provide income support to the poor and allow people to retire earlier, are the centerpiece of the government’s expansionary 2019 budget. Critics say they are unsustainable for Italy’s strained public finances.
“These are two measures…of which this government is proud,” Prime Minister Giuseppe Conte told reporters after the cabinet approved the legislation. “This is a government that keeps its promises.
It must now be approved by parliament within two months.
The need for an income support scheme, dubbed ‘Citizens’ Income’, has been a 5-star battle cry since its inception a decade ago, and its resolve has grown stronger as poverty levels have soared. record levels in recent years.
“This reform will improve the quality of life of 5 million Italians in difficulty,” said 5-star leader Luigi Di Maio. “We have founded a new welfare state in Italy.”
Italians in absolute poverty, defined as not having enough money to buy a basket of basic goods and services, rose to 5.1 million in 2017, according to the latest data from the ISTAT statistics office. . This represents an increase of more than three times in a decade.
The largest proportion live in the southern regions which were the basis of 5-Star support in last June’s election, when it was Italy’s largest party with some 32% of the vote.
However, public finance constraints have forced the movement to drastically reduce its initial citizen revenue plan, which called for spending 17 billion euros ($19.37 billion) in the first year.
The latest version will not come into force until April and will cost state coffers around €7 billion this year and €7.8 billion in 2020. It will provide means-tested income support up to €780 euros per month for a single person living in rental accommodation with no other income.
A family of two adults and one child can receive up to 1,080 euros, while a family of two adults and three children can receive up to 1,280 euros. The owners do not receive the standard rental contribution which is 280 euros. [L8N1Z851N]
The pension reform, championed by the League, reverses a 2011 law that sharply raised the retirement age to 67 for many Italians, with further increases planned to match rising life expectancy .
Under the new rules, people will be able to retire when the sum of their age (62) and years of pension contributions (38) adds up to 100. [L8N1ZF5WD]
“I am very happy to have turned words into facts,” said League chief Matteo Salvini, alongside Conte and Di Maio, adding that he hoped to govern with them for the next 10 years.
The changes, which will take effect from April for private sector employees and August for state employees, will cost 4 billion euros this year and just over 8 billion in 2020.
The 2011 reform, passed at the height of the debt crisis, left hundreds of thousands of Italians who left their jobs prematurely expecting to retire soon after, stuck for years without a job or pension.
The government says the new rules will end their plight while allowing older, less motivated workers to retire and free up jobs for unemployed young people.
Critics argue that in the long term, Italy’s large public debt and aging population mean it cannot afford to lower the retirement age.
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Editing by Jon Boyle and Alexandra Hudson