Italy budget: Parliament backs lowering retirement age and new basic income after standoff with EU

Spending plan approved by MPs amid concern in Brussels over populist government’s expensive policies

The Italian parliament has approved the government’s 2019 budget days before the year-end deadline following a lengthy standoff with the European Union over spending.

Leaders of the country’s ruling populist coalition had been forced to pledge to cut the deficit next year to 2.04 per cent of GDP after Brussels rejected an original target of 2.4 per cent, saying it broke EU fiscal rules.

However, a raft of expensive flagship policies, including a basic “citizens’ income” for some of the poorest in Italian society and a reduction in the retirement age, remain in government spending plans.

The budget, which overcame its final hurdle on Saturday in passing a vote in the Chamber of Deputies by 327 to 228, had prompted concern when it was first presented in October.

The European Commission baulked at the costly policies Italy looked to introduce despite having proportionally the second highest public debt in the Eurozone after Greece, taking the unprecedented step of asking Rome to redraft the plan.

But the Italian government, led by the anti-establishment Five Star Movement and far-right League party, struck a late deal with the Commission last week to force though the spending plan, agreeing a number of measures including lowering its seemingly unrealistic growth forecasts.

The budget will still see the introduction of a basic payment of around €780 (£700) a month for those on low incomes, a policy for which the government has set aside somewhere in the region of €10bn (£9bn).

The retirement age will also be lowered from 67 to 62 for millions of people who have paid into the Italian pension system for at least 38 years.

Meanwhile, the government has also agreed to introduce a string of tax cuts for individuals, including relief for self-employed people earning less than €65,000 (£58,500) a year.

Tax has, however, been increased for banks, insurers and gambling companies.

Italian prime minister Giuseppe Conte described the budget on Saturday as “the first step of a broad and ambitious plan of reform” which would “turn Italy inside out like a sock” and finally boost its chronically sluggish economic growth.

But, in an acrimonious debate before the measures passed, opposition politicians complained the last-minute nature of the deal with Brussels had given them little time to assess the impact of amendments to the budget.

Several hundred supporters of the centre-left Democratic Party had also staged a protest outside parliament.

The party’s MPs inside the chamber held up banners accusing the government of “increasing taxes and cutting pensions” as a result of their budget.

Italian financial markets have welcomed the end of hostilities with Brussels, and Italy’s benchmark bond yields hit a three-and-a-half month low on Friday after a successful debt auction.

Seven months after coming to power, the government remains popular, with the two ruling parties backed by around 60 per cent of Italians, according to opinion polls.

Additional reporting by Reuters