Italian pensions: Keep on working, please

Date: 30/08/03

Silvio Berlusconi thinks about retirement (but not his own)

A SPRIGHTLY 66, Silvio Berlusconi, Italy's prime minister, believes that his fellow Italians should follow his example. They should work longer, he suggests, and retire from work five years later than they presently do. Not that Mr Berlusconi, who turns 67 in a few weeks, wants Italians to copy him to the last digit. He would settle for a retirement age of 62 for them.

Although Italian men must wait until 65 before they officially qualify for an old-age pension from the state, those who have got 35 years of contributions under their belts can retire and draw state pensions when they are 57. Many do, and this lies behind the state scheme's financing crisis. Despite clawing 40% of gross earnings in social-security contributions from employers and employees' pay-packets, the scheme by no means covers expenditure.

Spending on state pensions already gobbles up over 15% of GDP, a figure certain to rise as Italy's awkward demographics of low birth rate and increasing longevity push the scheme even further out of financial balance. Mr Berlusconi is not alone in thinking that something must be done. Antonio Fazio, the governor of Italy's central bank, has been banging the pensions-reform drum for several years. There is a structural imbalance between benefits and contributions, and the system is unsustainable, he says. Whether they like it or not, Italians should retire later.

Is Mr Berlusconi the man to persuade them? Before Italy took over the EU's six-month presidency in July, he hoped to convince other leaders to adopt a Europe-wide solution. That now seems unlikely to come about, so Mr Berlusconi will be unable to enforce his proposal, then pin the blame on Brussels. Moreover, two parties in his right-wing coalition, the Northern League and the National Alliance, fearful of offending their supporters, have expressed reservations about Mr Berlusconi's pensions-reform ideas. In Italy, such notions don't win votes.