ROME (Reuters) -Italy's government said on Thursday it would introduce a new welfare subsidy for the low-income elderly as part of a broader plan worth more than 1 billion euros ($1.09 billion) over two years.
An ageing population and low birth rates are a major worry for the euro zone's third-largest economy, leading to falling productivity and higher welfare costs in a country where more than a third of residents are expected to be over 65 by 2050.
"We are the first nation in Europe for the number of elderly people and the second in the world after Japan, so a reform was necessary," Deputy Welfare Minister Maria Teresa Bellucci said after the cabinet approved the new subsidy.
Among several measures, the package envisages a so-called monthly "universal benefit" of 1,380 euros to support poor people over 80 with "very severe welfare needs", a government document showed.
The benefit, which strengthens a previous subsidy, will be paid starting from Jan. 1, 2025, and will remain in place until Dec. 31, 2026.
At 48, Italy's median age is the highest in the EU, and it also has the highest old-age dependency, defined as the ratio of people aged 65 and over to those of working age, according to statistics agency Eurostat.
Pensions already eat up more than 15% of gross domestic product (GDP), and the Treasury expects spending to reach 17% of output in 2042.
This makes it harder for Rome to reduce its public debt, which at around 140% of GDP already is the second highest in the EU and drains resources from other areas such as education and childcare.
In its 2024 budget, the government earmarked around 1 billion euros for several measures aimed at addressing Italy's demographic crisis. One temporarily removes social contributions paid by working mothers with at least two children.