Romano Prodi's government Friday approved plans to increase the retirement age for most workers in a bid to deflate Italy's ballooning pension bill after overcoming strong resistance from trade union leaders.

However, the reform was expected to face a rough ride in parliament after the summer break due to opposition from the far-left wing of his nine-party coalition.

"The Council of Ministers reached a general consensus after a broad discussion," government undersecretary Enrico Letta told reporters after a cabinet meeting in Rome.

The meeting came just hours after trade union leaders had agreed to the plan following intense all-night discussions with Prodi.

"This proposal satisfied all of us and will please all Italians," Prodi had said in announcing the deal.

However, Prodi's optimism risked being ill placed.

Speaking within minutes of the cabinet meeting ending, Refounded Communist Party (PRC) leader Franco Giordano said his judgement of the deal was "strongly critical, negative."

"We need to consult the workers. The issue is still open," Giordano added.

The PRC brought down Prodi's first short-lived government over a similar issue back in 1998 and its support is vital in parliament's upper house, where the government enjoys only a wafer-thin majority as a result of last year's narrow general election victory.

The agreement reached on Friday aims to soften the effects of a reform approved by the previous centre-right government of Silvio Berlusconi that envisages a sharp and sudden rise in the minimum retirement age - from 57 to 60 years - as of January 1, 2008.

The new system introduces more gradual steps, raising the retirement age to 58 in 2008, 59 years in 2009, and 61 years by 2013. Women will be allowed to retire a year earlier.

Slightly different rules apply to the self-employed and those doing toiling jobs such as miners.

Economy Minister Tommaso Padoa-Schioppa said the changes would produce lower savings estimated at about 1 billion euros per year for the next 10 years, but noted that the added costs would be covered by social security institutions.

Italy is under pressure from the European Union to reduce its enormous public debt, one of the highest in the world.

Its pension bill increased by 3 per cent to a whopping 215 billion euros (296 billion dollars) in 2005, or more than 15 per cent of the country's gross domestic product, according to latest data available provided by national statistics institute Istat.

Italy also suffers from an ageing population and experts say the ratio between pensioners and workers is set to hit 53 per cent by 2020 and 83 per cent by 2040 unless people are forced to retire later.

The latest pension reform was expected to be included in the 2008 budget, which must be cleared by parliament by the end of this year.

DPA

Güncelleme Tarihi: 20 Temmuz 2007, 17:06