Gavin Jones and Giuseppe Fonte

ROME (Reuters – Italy’s government is working to reform the system to allow workers to take early retirement without increasing their pensions. Rising borrowing costs are fueling concerns about Italy’s massive public debt.

Officials said Mario Draghi’s government would like to give more flexibility to the system while also avoiding the fate a 2011 unpopular reform that sharply increased the retirement age, but was then suspended after backlash in 2018.

An interim replacement will expire at the end the year. However, finding a permanent solution is urgent given the low interest rates for Italy.

Draghi plans to strike a deal over reform with national unions by March 31st. A key meeting between ministers and union leaders is scheduled for next week. The former European Central Bank Chief will have to support his multi-party coalition.

Andrea Orlando, the Labour Minister, told Reuters that reforms would not apply to everyone.

“It will consider different life expectancies, the position of domestic workers, and that work lives can often be interrupted,” he stated.

Eurostat data show that Italy has one of the oldest population in the world and spends more on its pensions than any other European nation, except Greece. The Treasury reports that Rome’s 2020 pension bill surpassed 17% of the country’s national output.

As Rome has struggled to deal with its ever-aging population, the new pensions reform is the seventh such overhaul.

High pension costs impede the ability to spend more on productive areas like infrastructure and schools. It is also difficult to lower a public debt that amounts roughly 150% of GDP.

RISE BOND YIELDS

It is slowly becoming more difficult to service the debt which, in proportion, ranks second in the Euro zone. The possibility of the European Central Bank raising interest rates and ending asset purchases has caused yields on Italy’s 10-year government bonds to soar to nearly 2% from below 1% just two months ago.

Officials stated that people who wish to take early retirement can do so provided they understand their pensions will be limited by how much they contributed to the system.

This plan has been supported by the unions. The only thing that will prove difficult is the amount of pensions to be decreased for people who quit early.

Rome will expand existing mechanisms that allow unemployed people, disabled persons, and those with “strenuous jobs” to receive an early pension. These are the demands of unions.

Roberto Ghiselli is a national coordinator for the main union in the country, the CGIL. He praised the government’s decision to investigate ways of allowing early retirement but also said that Rome must have enough resources available to provide adequate income to pensioners.

It is difficult for the Treasury to achieve its goal of a sharp fall in borrowing, as it has been aiming at this. The Treasury is resisting the pressure of coalition parties to increase deficit. Any extra pension expenditure must be compensated by taxes or spending reductions.

The 2018 “quota 100” scheme allowed individuals to receive a pension when they reached age 62, provided that they had contributed 38 years. This is the total of both the numbers giving “100” in the scheme’s title.

Following a fall dispute that triggered a strike by the CGIL for one day, Draghi implemented “quota 102”. This raised the minimum retirement age from 64 to 64 by raising it by two years. However, this was only for the current year.

Ghiselli, CGIL said that the government rejected the proposal of the unions to let people draw a retirement pension after 41 consecutive years of contributing regardless of age.