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Structural Challenges for Europe

Edited by Gertrude Tumpel-Gugerell and Peter Mooslechner

The main thrust of the book is that the sharing of mutual experiences is important for generating an acceptable policy mix, both at EU and national levels. The contributors highlight key financial issues, including the role of FDI and of foreign banks in the still ‘under-banked’ acceding countries, the re-launch of social security systems and the fiscal challenges of financing the catch-up process. They also examine the ongoing EU debate surrounding the application of the Stability and Growth Pact in Central and Eastern European Countries (CEECs) and go on to explore the contrasting evidence that some CEECs have shown more extensive privatisation efforts than some EU countries.
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Chapter 12: Pension reform: what lessons from Italy?

Daniele Franco


Daniele Franco 1. INTRODUCTION1 The reform of the pension system is on the political agenda of most European countries. There is a widespread need to adjust pension policies to new demographic and economic conditions while safeguarding their essential achievements. Pension reform is particularly important in Italy, where it is at the core of the effort to ensure fiscal consolidation and longterm fiscal sustainability. In Italy pension spending is proportionally higher than in any other western industrial country (15 per cent of GDP in 2001) while the fertility rate is among the lowest (about 1.2 children per woman of childbearing age). The ratio of the elderly (65 years and over) to the working age population (20 to 64 years) is expected to increase from 29 per cent in 2000 to about 40 per cent in 2020 and 69 per cent in 2050; this ratio will be among the highest in the world. These problems are compounded by the high public debt, which requires Italy to run sizeable primary surpluses in order to comply with the fiscal rules introduced for European Monetary Union. Pension reform is also an important component of any policy aimed at improving the functioning of the Italian labour market, namely at increasing the present low participation rate. Since the share of pensions in total social spending is very high (70 per cent), pension reform is moreover a precondition for implementing policies which may increase public support for non-elderly citizen groups and finance additional spending on long-term care....

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