To some, the death of Silvio Berlusconi on 12 June this year, is the end of an era for Italian politics. Berlusconi was the longest-serving prime minister in the history of the republic and a highly controversial figure, at home and abroad. He can be described as the first modern European populist leader.
By the time of his passing, his political influence had waned, but he left a mark on Italian politics and culture that no other leader ever did, largely thanks to his once nearly complete control of the country’s media.
Under Berlusconi’s leadership, the Italian pension system was transformed. The late leader of the Northern League Roberto Maroni, who was labour and social policy minister in Berlusconi’s second government, from 2001 to 2005, pushed through a reform of the pension system that raised the retirement age and introduced a six-month period of automatic enrolment in second-pillar pension funds.
For six months starting in January 2007, workers signing new employment contracts automatically became members of pension schemes. Unless workers explicitly opted out, their severance pay package, a statutory monthly payment made by employers equating to 6.91% of gross salary – known as trattamento di fine rapporto or TFR – would be transferred to a second-pillar pension.
That single measure is still responsible for the largest influx of workers into the second-pillar pension system. Since then, no other government has managed to achieve what Berlusconi’s did in that area.
The fact that a staunch supporter of freemarket ideas and policies – he famously supported a ‘flat tax’ fiscal regime until his dying days – was able to achieve a form of automatic enrolment is remarkable. Berlusconi was shrouded in controversy for most of his career, and was known to overpromise in terms of economic growth, tax-cutting and, indeed, higher state pensions.
However, as it turns out, Berlusconi did good things as well. That is a cliché often used by supporters of highly divisive figures such as Berlusconi. The same argument has been used by those Italians who are not ashamed of Mussolini. The point is not to compare Berlusconi with Mussolini but to debate whether an essentially misguided leader can achieve anything positive.
Today, Italy is led by some of those same political figures that Berlusconi had brought together in a large right-wing coalition on several occasions.
Giorgia Meloni’s government is discussing a plan to incentivise workers, particularly young ones, to join second-pillar schemes. This is all too urgent if young generations are to avoid poverty in retirement. It would also have a positive effect on the Italian economy, as larger pension funds would be able to invest larger sums in domestic businesses and projects, not to mention government bonds.
The lessons learned from Berlusconi’s legacy in pensions is perhaps that leaders can abandon their orthodoxy and pursue policies that seem to contradict their ideology.
The current government would do well to consider a robust automatic enrolment policy and other incentives, such as lower taxes on pension fund returns, to strengthen the Italian pension system once and for all.
Carlo Svaluto Moreolo, Deputy Editor
carlo.svaluto@ipe.com
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