ITALY - Italy's power struggle in government will not affect the redistribution of €5-6bn of severance pay to banks and insurers next year, according to one leading pension fund.

This Wednesday prime minister, Romano Prodi, resigned after just ten months in the job before commencing almost immediately negotiations for a return.

His tenure has been hampered by having to find concord among a diverse range of coalition partners, including hardline socialists.

But Stefano Pighini, a board member of Fopen, the €430m scheme for employees of electricity giant, Enel, said that severance pay was on track to commence next January.

"From the end of June about 12 million workers have to choose whether the money stays in the company or goes to a pension fund," he explained.

"It has not been the question of TFR [severance pay] but raising the state pension which has proved one of the obstacles that led to the fall of Prodi's government," said Pighini. The government's aim was to raise the normal retirement age from 57 to 60 at the end of this year.

It remains unclear whether Prodi will make concessions on this point as part of his return but Pighini remained confident that the flow from severance pay to pension funds, of which he estimated €5-6bn will ultimately end up with insurers and banks, will begin on time.

"They've begun a big campaign in the newspapers, TV and associations to raise awareness among workers," he said.

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