Italy set to freeze its retirement age

In a move that could please workers but worry investors, Italy's requirement to constantly review and push back its retirement age could be scrapped, thanks to pressure from the far-right League party.

The party, which is part of Prime Minister Giorgia Meloni's coalition government, believes the current retirement age of 67 should not be changed, despite warnings it could put too much pressure on the country's economy.

Italy's pension law, which calls for reviews to be held every two years and for the retirement age to be raised if life expectancy increases, has long been opposed by trade unions but the League party is now also against it, with Claudio Durigon, a League senator and under-secretary in Meloni's government answering to Marina Elvira Calderone, the minister of labor and social policies, telling the Financial Times newspaper: "If you have the retirement age at 67, it's a huge problem."

He described the retirement law, which was adopted during the Eurozone sovereign debt crisis as Rome tried to restore market confidence, as "a beastly policy toward the working man".

Durigon, who is a former factory worker and union leader, said he has heard of older workers who have died while operating heavy machinery.

Italy's statutory pension age has been 67 since it was raised by five months in 2019. It is set to be increased by another three months on Jan 1, 2027.

But the Financial Times said Minister of Economy and Finance Giancarlo Giorgetti, who is also a member of League, is open to putting a two-year freeze on the pensionable age, and said it is "under discussion" in government. Any decision, he said, will take "the overall economic picture" into account.

The country's independent parliamentary budget office has said freezing the retirement age could push pension costs up by 0.4 percent of GDP between now and 2040, nudging the country's debt-to-GDP ratio up to 139 percent by 2031, which is seven percentage points more than it was predicted to be.

Filippo Taddei, a senior European economist at Goldman Sachs, told the FT any change would send a dangerous signal to investors.

"Italy's pension reform — the automatic linkage between the statutory retirement age and life expectancy — is the anchor of its fiscal sustainability," Taddei said. "If people live longer, the retirement age moves up and that keeps the fiscal system automatically in balance."