Maria Teresa Cometto reports on the political criticism of the technocratic-driven pension reforms of December 2011. Attention has focused on the so-called esodati, rather than the calamitous state of the public pension system

Pension reform is a hot issue in Italy and was a priority for Mario Monti's technocratic government. Last December's reforms, coupled with increased taxation, were praised by all, as they saved Italy from a serious financial crisis. However, this overall consensus is fracturing.

These criticisms are focused on the treatment of the ‘esodati'. They are employees who accepted voluntary redundancy (usually with financial incentives) thinking they would be eligible for early retirement and access to the pension payments. Instead they got caught in a limbo. Under the December reforms, esodati are not retired and they cannot be re-employed, so they will be without income - pension or salary - until the newly announced retirement ages of 66 for men and 62 for women. Most of the esodati are under, or around, 60 years old.

The main question is how many esodati are there and how to provide for them. What has been forgotten is any attempt to encourage workers to invest in their own private supplementary pensions, even though this is crucial, as future Italian social security schemes will be less generous.

Everybody remembers the tears of Elsa Fornero - the current minister of welfare - when she announced the pension reforms last December. In June 2012, she admitted she was wrong in estimating the number of esodati: she had said they were only 65,000 while they are as many as 300,000 according to the unions. "It's true, with esodati we were wrong, anybody can be wrong. But I'd like to remind you that when we made the pension reform, we did it in 20 days because the country was on the brink of a financial abyss. People have already forgotten that. We did not have the luxury of time to think longer because other governments had previously taken the luxury of excessive gradualism".

After that ministerial admission, Monti signed a ministerial decree to protect the initial 65,000 esodati, promising "to find other solutions, fair and financially sustainable" for all the others, without specifying how many there are. This topic will stay around until the next political elections.

On top of this, the debate is complicated by a political landscape characterised by new movements driven by personality rather than policy. A good example is the comedian-turned-politician Beppe Grillo. His Five Star Movement won around 8% of the vote in last spring's partial local elections and hoping to stand in next year's general election.
Grillo fights traditional ‘corrupt' political parties and he says that Monti is incapable of reforming the system, as he is part of the problem himself. On pension reform, Grillo is particularly forthright: "It must begin with those who have retired already, without continually raising the bar of retirement with the laughable excuse of life expectancy. I do not care about statistics".

The former ruling party, PdL (People of Freedom) is in meltdown after Silvio Berlusconi's resignation. The former welfare minister Maurizio Sacconi defends his government's 2010 changes to pension system, and claims there was no need to further tighten the rules.

He notes: "the Italian pension system has been financially sustainable for some time, at the cost of higher contributions, but now it has become socially unsustainable because of the abrupt transition to the new rules. The case of ‘esodati' concerns a wider audience of older workers exposed to impoverishment. We will present proposals to enhance social sustainability with secure rules that will allow to complement the compulsory social security on a voluntary basis". He did not elaborate about the proposals.

The abrupt transition mentioned by Sacconi is the new retirement age effective immediately - 66 years for men and 62 for women. Women's retirement age will gradually raise to 66 by 2018; for both men and women it will be 67 by 2021 or even higher, depending on longevity. If a male worker has made contributions for 42 years and 1 month (41 years and 1 month if a woman) he can retire, but with reduced benefits. The other ‘abrupt' change is switching to a ‘contribution system' for all workers, which means calculating benefits according to contributions as opposed to final salary.

The Democratic Party (PD) led by Pierluigi Bersani and the left wing union CGIL led by Susanna Camusso have announced an alliance to fight for the esodati. This April, CGIL alongside the more moderate CISL and UIL labor confederations organised a demonstration in Rome against Fornero's reform, with thousands of protesters showing their discontent with Monti's technocratic government.

In the meantime, nobody is talking about the actual pension funds. These are really at a standstill in Italy. Not only have they not grown in terms of membership (5.5m workers, over 24% of the total workforce contribute to pension funds), nor in terms of assets (€90bn, 58% held in Italian government bonds), but they are also losing contributions.
As a result of the current global economic crisis, around 1.1 million workers, or 20% of all members, have stopped contributing and more are withdrawing money from the funds for emergency needs.

Moreover, pension funds' inadequate performance - 0.1% for closed funds and 2.4% for open funds in 2011 - has made them less attractive compared to the 3.5% guaranteed revaluation of the TFR (the alternative to pension funds including the money that employers put aside to give as a lump sum to employees when they retire; last year the TFR guaranteed 2.6%).

"Supplementary pension schemes remain the Cinderella of the Italian retirement system," remarks Giuliano Cazzola, vice-chairman of the House of Representatives' labour committee and member of PdL party. A former union leader and recognised as an expert on pensions, Cazzola has given up hope of change and will not run in the forthcoming general elections.