Pension reform, a crucial part of Silvio Berlusconi’s centre-right government agenda, got the go-ahead in Italy’s lower chamber of parliament on July 28.
The vote sealed the government’s victory on the controversial issue of pensions nearly two years after the reform bill had been presented to parliament and only a few days before the beginning of the summer recess. However, there is no certainty that it will close the pension chapter for good.
The reform was approved with a vote of 333 for and 148 against after MPs voted on 109 amendments suggested by the opposition. According to government figures, the reform will result in savings of e39bn from the pension bill between 2008 and 2013, about 0.7% of annual GDP.
Berlusconi has managed to keep the promise to the EU finance ministers at the last Ecofin meeting, which he attended as interim finance and economy minister, following Giulio Tremonti’s resignation.
From 2008, the retirement age will move to 60 from 57, with 35 years’ contributions. From 2010 the threshold will be pushed up to 61 years for employees and 62 for self-employed workers, and in 2013 it could be changed to 62.
Italians who chose to postpone retirement will be rewarded with an extra monthly 32.7% tax-free bonus, but will be required to invest their end-of-career indemnity, known as TFR (trattamento di fine rapporto), in a pension scheme.
This principle is called ‘silenzio assenso’ – silent consent. It would allow the investment of TFR unless the holder explicitly forbade it. It is the only case of inertia selling allowed in the country and is expected to strengthen the second pillar.
The ‘retirement windows’ – four dates a year when retirement is allowed – will also be reduced to two in a bid to keep older workers longer.
Berlusconi has won the pension challenge, but his victory in parliament has not come cheap. In order to push the reform through, the prime minister had to secure the support of Umberto Bossi, leader of the Northern League, the coalition party whose agenda is achieving federalism.
It was the Northern League, which, on July 21, as the reform seemed close to approval, pressed for the vote to be postponed to the following week, when parliament was also expected to vote on federal reforms, making the future of the two reforms interlocked.
The government must now concentrate on the controversial federal reform bill, also part of the agenda proposed by the coalition during the last general elections, but recently criticised by another coalition party, the UdC, which had presented amendments to the federal reforms bill.
The approved pension reform does not only follow countless struggles within the coalition but long consultations between the government and the trade unions, the exchange of drafts among the upper and lower chambers of parliament and their labour committees, and Standard & Poor’s ratings services downgrade of Italy’s rating from AA to AA-.
A ‘hot autumn’ awaits Berlusconi’s coalition. Together with the federalism projects, the government is going to pave the way for the implementation of the pension reform.
Welfare minister Roberto Maroni, as well as newly appointed economy minister Domenico Siniscalco, will work together on a joint decree to fix the rules for the payment of the 32.7% tax-free bonus.
The two ministries are also expected to decide what information should be fed to the pension assets database – the Casellario – to monitor transparency and collect information about migrant workers, invalidity and workplace accidents.
But the most keenly awaited innovation is the decree regulating the use of TfR. The government has one year to produce the decree and 18 months to pinpoint the categories of workers that will allowed special treatment, such as workers with physically demanding jobs and female workers with children.
The trade unions are waiting for the government to start the decree implementation stage to lobby for alterations, a spokesman for Cisl, which with Cigl and Uil, represents the majority of workers in the country.
The unions regards the chapter of pension reform as “closed”, he said.
“We have said it again and again, and I confirm it today, we do not see this reform positively.”