April 13 (Bloomberg) -- Italy’s main labor unions took to the streets of Rome today to protest Prime Minister Mario Monti’s pension-system overhaul, saying it traps hundreds of thousands of workers in a legal limbo without retirement pay.
Maria Dinelli is one such person. When she left Alitalia SpA in 2008, her early-retirement deal with the airline provided jobless benefits until her pension payments begin in 2015. Now, under the reform that raised the retirement age, Dinelli won’t get the payments until 2017, leaving her stuck in a two-year gap without any income.
“I’ll be without a salary or pension for two full years before the retirement age, and will have to put money aside,” Dinelli, 58, said in a Bloomberg Television interview in Rome. “You were told you had guarantees, then you lose it all because a new government takes power and changes the rules.”
Monti’s pension plan was part of a $26 billion austerity package passed in January to fight the sovereign crisis by putting Italy’s debt, the second highest in Europe after Greece, on a downward trajectory from next year. Monti followed with measures to open closed professions, reduce bureaucracy and ease firing rules that helped bring down the country’s bond yields from near euro-era highs when he took power in November.
Tens of thousands of people marched through the streets of central Rome this morning before a rally where union leaders criticized the government for underestimating the extent of the problem. Last night the Labor Ministry said there are 65,000 Italians who may be left without support between when they leave work and when their pension kick in as the higher retirement age delays their payout. Unions say the figure is about five times that amount.
“We weren’t impressed by the government’s statement,” Raffaele Bonanni, head of the CISL union, told the crowd in Rome’s Piazza dei Santi Apostoli. “The labor minister is acting like an ostrich, sticking her head in the sand because she doesn’t want to look in the faces of the hundreds of thousands of people here today seeking clarity.”
The Labor Ministry “is studying ways” to assist some workers who signed collective agreements that provided them with jobless benefits for the period until their pensions start, the ministry said, according to the e-mailed statement.
The ministry’s figures contrast with those of CGIL, which estimates 300,000 workers have been left in the lurch by Monti’s overhaul, according to Claudio Di Berardino, head of the union in the Lazio region. “If these figures were correct, then we’d have to say that the thousands of workers who’ve turned to the union for help are not real and just ghosts,” Vera Lamonica, a CGIL leader, said in an e-mail. “The government is playing with fire.”
Mauro Nori, head of pension agency INPS, told the Senate Labor Committee on April 11 that the group totals at least 130,000. Providing assistance to such workers could “require additional resources of about 10 billion euros ($13 billion),” Roberto Pessi, a labor law professor at Rome’s Luiss University, said in an interview. He estimated the group may total as many as 450,000 workers.
Besides raising the pension age and penalizing early retirement, the reform based the system on contributions rather than salary and ended inflation indexation for larger pensions. The overhaul means that younger workers will collect smaller pensions than their parents.
The plan, which Monti has called “cutting edge,” was part of his efforts to shore up public finances to boost economic growth, which has trailed the euro-region average for more than a decade. Italians are chaffing under the effects of the austerity package, which apart from lower pensions, brought higher taxes and record gasoline prices that have reached almost 2 euros a liter, or $10.50 a gallon. The resulting slump in consumer demand helped push the economy into its fourth recession since 2001.
“An overhaul of the pension system was unavoidable because the old scheme was too generous compared to the country’s possibilities and the European standards,” Nicola Marinelli, who oversees $153 million at Glendevon King Asset Management in London, said by phone. “That said, the protest of these workers may be a harbinger of future social tensions. I don’t think younger workers have really realized they will have starvation-level pensions.”
While the Labor Ministry is looking into ways to help some workers left in limbo, the pension overhaul included financing “adequate to cover all needs without requiring recourse to further resources,” according to last night’s statement.
Labor Minister Elsa Fornero, author of the pension changes and the jobs-market shakeup, said on April 3 that experts from the government and INPS will come up with a solution by June 30.
“I can’t rule out that the government will resort to a wealth tax,” said Pessi, the labor law professor. “So far, the government hasn’t used a heavy hand with the richest taxpayers, partly to avoid negative consequences as far as foreign investments are concerned, but now I think it’s about time for those who have more to contribute to the needs of the country.”
Back in her Rome apartment, Dinelli looks at bookshelves full of guides to countries such as China, India and Australia.
“After working for so many years, I’d have liked to spend money the way I wanted, maybe traveling or enjoying some peace of mind,” she said. “I think people in my situation have lost faith in our institutions.”
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