Pensions and the Fornero Reform: Why Lawmakers Are Not Escaping Ignorance of the Law and Controversy

Ignorantia legis non excusat It is the brocard of a Latin legal maxim that means "ignorance of the law does not excuse" (or "does not exonerate"). This fundamental principle establishes that no one can invoke their lack of knowledge of a legal rule to justify a violation, since it is assumed that every citizen should know the law, especially if the legislative process is public and transparent. In Italian law, the principle was codified, without any reservation, in thearticle 5 of the Criminal Code; but the Constitutional Court has clarified that ignorance of criminal law can be excused if unavoidable and blameless, evaluating the individual's objective and personal circumstances. The rule that applies to all citizens obviously applies to those who write, discuss, amend, and approve laws, for whom even unavoidable and blameless ignorance cannot be tolerated, given that they are elected by the sovereign people to institutions (Parliaments) that perform the legislative function. Yet it is often precisely the legislators to give proof of not knowing the lawsWhether this happens through material ignorance or political exploitation makes little difference.

The debate on the budget law and accusations of a worsening of the Fornero reform

In the political controversies that accompanied the launch of the budget maneuver, the opposition – after the ping pong of the majority with the amendments on pensions – they have accused the government of "worsen the Fornero reformTo clarify this point – as in nineteenth-century novels – we need to take a step (or rather two steps) back. First, it's right to start with the judgment on the 2011 reform and clarify whether we agree with the positive judgment that prevails throughout the civilized world, on the markets, by national and international financial institutions, economists, demographers, or with the mendacious and defamatory campaign of the terrible couple. Landini/Salvini (God makes them and then pairs them off!) aided by unprincipled media. The answer to this preliminary question also determines the second: what is meant by "worsening."

Evolution of pension legislation

The 2011 reform has undergone many worsenings, the more serious by the yellow/green government with the introduction of quota 100 and its related provisions (dl n.4/2019), so much so that subsequent governments, even the current one, have had to roll up their sleeves to get out of it with the least possible damage and decisively change direction, discouraging those types of activities that had been incentivized in 2019. According to this logic, the adjustment to the requirements foreseen in 2027 and 2028 is not a worsening, but an improvement because it consists – albeit in a somewhat clumsy way – in the application of the provisions of the Fornero reform regarding the automatic adjustment, every two years, of retirement requirements to the increase in life expectancy already implemented in 2013, 2016 and 2019: updates that have tightened the requirements, respectively, by three, four and five months. Then the adjustment mechanism remained blocked at 42 years and 10 months for men and one year less for women until 2024. In the following two years there were no appreciable demographic changes, which are instead expected in 2027-2028 to the tune of three months.

The government and gradualism

The government, wanting to be precise and use the yardstick of Elly, with the gradual operation (1 month in 2027 + 2 in 2028), has improved the Fornero discipline, because under current legislation the variation would have been equal to 3 months starting from 2027. In reality it is instead a worsening, as a coverage of at least 1,5 billion was necessary. A case of wasted resources to send several thousand people into early retirement a month. The League, for its part, insists on its position and has submitted a motion to this effect, approved by the Chamber of Deputies. This motion has no legal force, but only political significance within the majority. Giancarlo Giorgetti – far from defeated because he has safeguarded the adjustment mechanism from his party's attacks, which, rebus sic stantibus, will only be discussed again in 2029 – is playing it cool, leaving room for possible second thoughts next year.

Sustainability of the pension system

It's important to make things clear right away: this rule is essential to ensuring the sustainability of the system. The growth in the pension spending-to-GDP ratio—the RGS wrote—is accelerating to reach 17,1% in 2040. This trend is primarily attributable to the increase in the number of pensioners relative to the number of employed people, driven by the demographic transition linked to the retirement of the baby boom generations, only partially offset by the increase in minimum entry requirements retirement and the effect of the containment of pension amounts exerted by the gradual application of the contributory calculation system over the entire working life. The forecasts also take into account the automatic adjustment of the transformation coefficients with respect to the evolution of the demographic-economic parameters and that of the retirement requirements compared to the increase in life expectancy, which are provided for under current legislation every two years. The size of these adjustments is determined consistently with the demographic assumptions of the reference scenarios based on the survival probabilities and life expectancy recorded by ISTAT. These endogenous mechanisms of the pension system – continues the RGS – have the function, as recognized at European and international levels, of reconciling the sustainability of the pension system with the adequacy of benefits. This is an important point to clarify.

Contribution mechanisms and their impact on debt/GDP

In the contributory system, retirement age corresponds to a inversely proportional transformation coefficient; remaining at work longer determines a corrective action to protect the adequacy of the treatment. It is also estimated that the permanent removal of endogenous mechanisms, under unchanged conditions, would lead to a increase in the debt-to-GDP ratio by about 20 percentage points by 2045 and by about 60 percentage points by 2070. Regarding only the mechanism for automatically adjusting pension system access requirements to increases in life expectancy, its elimination would lead to an increase in the debt-to-GDP ratio of about 15 points by 2045 and about 30 points by 2070. Giorgetti knows these things. This is nothing to joke about.