The agreed reforms, providing income support for the poor and allowing people to retire earlier, are the centrepiece of the government’s controversial 2019 “people’s budget”. But critics say the policies are unsustainable for Italy’s already-strained public finances.
The agreement means that, despite having to make some concessions after a drawn-out battle with Brussels over the budget, the two ruling parties get to keep their flagship election promises to voters.
“These are two measures…this government is proud of,” Prime Minister Giuseppe Conte told reporters at a press conference yesterday. “This is a government that keeps its promises.”
A woman reads the election manifesto on the M5S website. Photo: Vincenzo Pinto/AFP
The bill must now be approved by parliament within two months, but it’s expected to pass easily.
The current government is a coalition forged with difficulty last year between the right-wing League (formerly the Northern League) and the anti-establishment Five Star Movement (M5S), which has much of its voter base in poorer southern regions.
The new populist government has turned abruptly away from the austerity policies being followed across Europe, saying they don’t work, and warning that it wants to avoid mass protests like those seen in France.
Italy “can't concentrate only on financial stability, we also need to look at social stability,” Prime Minister Giuseppe Conte was cited as saying. “The austerity-oriented recipes of the past few years have failed.”
Both ruling parties are Eurosceptic, and while they’re (now) in favour of keeping the Euro and have no appetite for talk of Italy leaving the bloc, they accuse the European Commission of worsening Italy’s economic problems.
New welfare system
The “citizens’ income” scheme, which M5S has been demanding for a decade, is not a kind of basic income, as its name led many to think. It is in fact a new income support scheme for the poorest in Italy.
The country has long lacked the kind of state welfare policies seen in many other European member states.
The policy will provide means-tested income support, from 780 euros a month for a single unemployed person to 1032 euros for a family.
The government has repeatedly stressed that welfare is available to Italians only.
In reality, the payments are also available to foreigners if they’ve been resident in Italy for at least 10 years.
It also said that the full amount won’t be available to home-owners, and it included what it calls “anti-sofa” rules aimed at preventing misuse. These mean unemployed people signing up for the scheme will need to undertake training or commit to accepting a job offer potentially anywhere in the country.
Basic income proved a popular election promise for M5S, after levels of absolute poverty in Italy increased threefold in a decade, according to ISTAT.
A man sleeping rough in Rome, with a sign that says: “I'm hungry”. Photo: Giuseppe Cacace/AFP
“This reform will improve the quality of life for five million Italians in difficulty,” said M5S leader Luigi Di Maio. “We have founded a new welfare state in Italy.”
He said the payments, which will be made onto a card, will stimulate the economy, as “those who don’t spend the money on the card will lose it at the end of the month.”
However, the party did have to scale back its plans for the scheme dramatically when faced with the reality of Italy’s public finances.
The original plan would’ve cost the state 17 billion euros in the policy’s first year. The revised policy will cost around 7 billion euros this year, and will not take effect until April.
The previous government introduced Italy’s first “basic income” scheme in 2017 – called the “inclusion scheme” or REI – to alleviate growing poverty and inequality, however it was not as far-reaching and provided only €480 a month for families.
At the time, M5S criticised the policy and said Italy's poorest were waiting for a “serious measure.”
Lower retirement age
The other policy the government agreed on yesterday was the League’s flagship pension reform, called the “quota 100.”
It will roll back a deeply unpopular 2011 law, passed at the height of the country’s financial crisis, which raised the retirement age to 67 for many Italians and scheduled further increases.
Under the replacement law, people will instead be able to retire when the sum of their age (62) and their total number of years of pension contributions (38) adds up to 100.
The policy was unsurprisingly a winner with the League’s voter base, which is significantly older than that of M5S.
The changes, which will take effect from April for private sector workers and August for state employees, will cost four billion euros this year and more than eight billion in 2020
The government says the new rules are fairer and that it expects to open up a million jobs for the young unemployed as “less motivated” older workers are able to retire.
“How far away those weeks of arguments seem,” said League leader Matteo Salvini at yesterday's press conference, referring to the government’s long budget battle with the EU,
He declared “there will be a new European Renaissance in May,” when the government says the policies will start to take effect for most people.
However the implementation of the two flagship policies, which the government says will affect up to ten million Italians, is expected to be complex and potentially fraught with difficulty.
And critics argue that, in the long-term, Italy’s high levels of public debt and ageing population mean both policies are unaffordable, and warn that the new budget will further destabilise the country's struggling economy.
A counter showing Italy's public debt ticking in Milan station. Photo: Filippo Monteforte/AFP
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A counter showing Italy's public debt ticks in Milan station. Photo: Filippo Monteforte/AFP