ITALY - The International Monetary Found has said an earlier and phased raising of the pension age, set for 2008, would have been “preferable” for the country.

The IMF delegation, headed by Carlo Cottarelli, was positive on the pension reform, passed by parliament in July.

In a report, the IMF said: “The recent pension reform is a key step toward long term fiscal sustainability, although an earlier, phased increase in the retirement age, rather than a step increase in 2008, would have been preferable.”

“Implementation decrees for the pension reform should be introduced as scheduled starting with those related to the reform of the TFR [trattamento di fine rapporto, or end of career_indemnity].”

The investment of the TFR in pension funds is going to be a pivot of the pension reform, aimed at ending the expensive pay-as-you-go system and keep Italians at work until they are 60.

At present the government is trying to get workers of the private sector, who become eligible to retire under the old regime before 2008, work longer with the promise of a tax-free perk.

The bonus consists of a 32.7% extra on monthly wages for 57 years of age with 35 of contributions. This amounts to the sum that should have been paid to the national social security institute for the private sector, INPS.

Public employees are not eligible for the bonus “for reasons of compatibility with public finance”, according to welfare minister Roberto Maroni.

This perk - known as ‘super–bonus’ – has become officially operative at the end of September and will be in place until December 31 2007.

The IMF report went on to say there could be a five to six billion-euro hole in the public accounts, 0.4% of gross national product.

It has also recommended a reform strategy focusing on containing of primary spending of the government, for fiscal sustainability, deepening labour market reforms and boosting competition in product markets.

Tax-cuts plans, promised by the prime minister, should be postponed.