Italy’s pension reform: Berlusconi burlesque

Date: 11/10/03

Not for nothing do they call the man a populist

UNDER fire on pension reform, and sensing that this issue could make or break his government (it helped destroy his previous one in 1995), Silvio Berlusconi has announced that he will write to every household in Italy explaining his plans. That may not be a bad idea. For he faces more than the usual resistance of trade unions, who have called a four-hour general strike on October 24th. He faces more even than the habitual vacillation of his allies who, having agreed a modest compromise after tortuous negotiation, are now trying to water it down again. His real problem is that he is up against public opinion.

Pensions absorb 14% of Italy's GDP, the highest share in any big European country. They thus siphon off cash that could be more productively used elsewhere. Yet, in a poll for Il Messaggero, a Rome newspaper, only 25% of those questioned would accept more than “minor corrections”.

Behind that response lie some deep-seated cultural attitudes. The thrust of the government's reform is to persuade Italians to retire at an age that would be considered normal in most other countries. From 2008, a full state pension would kick in only at the age of 65 (for men) and 60 (for women), or after 40 years' worth of contributions. It would still be possible to retire, as now, at 57, or with 35 years' worth of contributions. But that would mean accepting a lower pension.

The trouble is that Italians, particularly in the north, are now used to the idea that it is their right to stop working in middle age. That seems odd, given that advances in medicine now allow 65-year-olds to expect 15 years or more of retirement. It is odder still in a country where so many leaders and opinion formers are well past normal pensionable age. President Carlo Azeglio Ciampi is 82. One of his predecessors, Francesco Cossiga, is still active in politics at 75. Italy's most revered newspaperman, Enzo Biagi, is still scribbling perceptively at 83. Even Mr Berlusconi is, at 67, no spring chicken.

Yet less than three in ten of their compatriots over the age of 55 holds a (legal) job. Even allowing for employment in Italy's extensive black economy, that figure is exceptionally low. As a first step towards raising it, Mr Berlusconi's reforms propose that, from January 1st, anybody of pensionable age who chooses to stay at work will get a bonus worth 32.7% of their salary, representing the cash they would otherwise have taken for their pensions.

Yet when asked by Il Messaggero, only 28% said they would take the money rather than opt for the deckchair. Italians may not be lazy; but they certainly have what economists call a high leisure preference. And that may be harder for Mr Berlusconi to tackle than even the noisiest protests.

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