The Ministry of Economy and Finance acknowledged the positive effects of the Fornero pension reform law. Following criticism of the minister who signed the law in recent years, this news is intriguing, but it is loaded with political meaning considering that the current Minister of Economy is Giancarlo Giorgetti, a member of the Northern League. Matteo Salvini’s party has always been one of the biggest critics of the Fornero reform and later opposed its own measure of identity on this issue, Quota 100.
While the center-right government’s economic and finance document contains a positive opinion about one of the most criticized laws of recent years, concerns are growing about the future stability of the pension system due to the Quota 100.
Pension of the future: the system is in balance
According to the scenario envisaged by the Meloni government in Nadef 2023, state expenditures on pensions will gradually increase in the coming years. As can be seen from the chart below, according to Mef data processed by Today.it, 2024 is the busiest year of the next three years: the increase compared to 2023 is over 20 billion, which means a total expenditure of 317.4 billion. billion euros were therefore committed only for retirement. To get an idea of the order of magnitude, the 2023 budget will be around $25 billion.
Spending is expected to remain just under 16% of GDP from 2025. The reason for the increase also lies in inflation, which revises the increases upward due to the indexation mechanism. But not only that: we must consider the interventions of recent years, the various “Quotas” that prevented the return to the Fornero law, with a particular suspect: Quota 100.
Giorgetti’s Nadef praises Fonero
According to data presented at Nadef, in the coming years the state will continue to spend more on pensions for three main reasons:
- Gradual aging of the population due to fewer births;
- Inflation;
- The operation of the pension system is decided by politics.
However, in recent years, legislation has tried to improve the situation: “In particular, reference is made to the implementation of the bonus regime (law 335/1995) and the rules introduced in 2004, 2010, and subsequently to the law 214/2011, which raises access conditions for old age and early retirement, thus increasing -significantly improved the sustainability of the pension system in the long term and guaranteed greater equality between generations,” writes the government’s Nadef Melons. And law no. 214/2011 is precisely the law that later became known as the “Fornero law”.
100 Quota Fee
Just as Nadef underlines the positive effects of Fornero, he also shows the negative impact on the accounts of the “Quota 100” measure, which the League wanted in 2019 but also affects the coming years. “As foreseen in Decree Law No. 4/2019, the Quota 100 early retirement channel covers individuals who have fulfilled the requirements as of December 31, 2021. However – as stated in Nadef – the years following 2021 are also affected by these effects. Both the years allowed by the measure The implementation of this measure due to the multi-year nature of the early retirement period, as well as to eligible persons who have completed the requirements in the 2019-2021 three-year period but have not reached Quota-based retirement, those who have reached 100 in the 2019-2021 three-year period or on the first possible deadline, will in any case be at least in the following years. “They reserve the right to retire with an appropriate regime.”
The 100 quota provided the opportunity to retire to those who met the premium conditions at the age of 62 and 38 in the 2019-2021 three-year period. On the other hand, the law requested by Elsa Fornero, the former Minister of Labor and Social Policies of the Monti government, sets the retirement age at 67, and this age can be brought forward for men over the age of twelve by cutting allowances. For women with a premium of 42 years, 41 years and 10 months, the year is 10 months. Following the adoption of Quota 100, other temporary “Quotas” followed and were postponed from year to year to “prevent a return to Fornero”. However, Nadef underlines that these measures do not benefit the state budget.
Pensions and the burden on state accounts: eyes on 2030
The effects on future accounts are not just due to 100 Quotas; There are other “quotas” to consider: “Added to these impacts are those arising from the possibility of individuals meeting the age requirement of 64 years of age reaching early retirement and the 38-year contribution provided by the 2022 budget law – Quota 102 – as well as 2023 – Quota 103 – 62 years of age.” and 41 years of contributions are valid for those who meet the common requirements. Moreover, the higher requirements are significantly more controlled due to the limited duration and, in particular, the implementation of the 100 Quota, which in the previous period provided significant access to retirement,” explains Nadef.
As can be seen from the graph of the Ministry of Economy, the level of pension expenditure from 2025 remains largely constant until 2029. Starting from 2030, the situation worsens and the ratio of expenditures to GDP begins to increase again, reaching 17 percent in 2042. According to MEF, “the dynamic is mainly due to the increase in the ratio between the number of pensions and the number of employed, triggered by the demographic transition, but is only partially compensated by the increase in the minimum requirements for access to retirement”. In summary, the increase in expenditures due to the increase in the number of retirees far exceeds the positive effects of the transition from the salary system to the premium system.
It is not yet clear how the system will be reformed, but the government is not talking about returning to Fornero and Quota 103 is expected to be approved in 2024: Anyone reaching age 62 and 41 years of contributions in 2023 will have a start date of three months for private employees, public with a six-month postponement for its employees. Work is being done on “84 quotas” for female workers.
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Source: Today IT
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
