Italy Court Strikes Down Pay Freeze With No Retroactive Effect

Italy’s Constitutional Court struck down a 2010 freeze on civil servants’ salaries aimed at limiting spending, though the ruling won’t have a retroactive effect.

The court said in a statement on Wednesday that the law is unconstitutional. While Premier Matteo Renzi’s government won’t be able to benefit from the freeze in the future, the court decision means it avoided the risk of having to reimburse an estimated 35 billion euros ($39.2 billion) to compensate for the wage freeze.

The law, passed under former Premier Silvio Berlusconi and extended in 2013 by Enrico Letta’s government, was extended again by Renzi last year.

The decision is the second in almost two months which sees Renzi paying the price for austerity laws passed by his predecessors. He managed to side-step an April 30 ruling on pensions due to retired workers by reimbursing only about a 10th of as much as 19 billion. Those increases to retired workers had been canceled in 2011 by then-premier Mario Monti.

Government debt in April rose to a record 2.19 trillion euros, the second-highest level in Europe as a percentage of gross domestic product, after Greece.

Before it's here, it's on the Bloomberg Terminal.