Italy govt, unions reach accord on pension reform

ROME, July 20 (Reuters) Italy's government and unions today reached a landmark agreement on changes to the pension system after more than eight hours of talks during the night.

Prime Minister Romano Prodi, clearly pleased at the outcome, announced the accord to reporters just after dawn and said it would be presented at a cabinet meeting later today morning.

The pensions issue had deeply divided Prodi's government, a Catholics-to-communists coalition.

Italy was under pressure from credit ratings agencies, the European Union and the IMF to get a grip on its pension spending.

Prodi tried to find pension reform that would not upset the hard-left Communist Refoundation party but still reduce the growing cost of Italy's aging population.

Asked at the impromptu early morning news conference if he had gotten the leftist parties on board, he said the agreement was between the government and the unions and that he would not change ''one line of it''.

Prodi said the accord followed the lines of the government's four-year economic plan, known as the DPEF, adding that he hoped it would offer a ''long-term'' solution to the pensions problem.

''We have written the last chapter on pension reform,'' Economy Minister Tommaso Padoa-Schioppa told the news conference, calling the accord ''a significant result''.

Under the accord, the current minimum retirement age would be raised gradually between 2008 and 20013 from the current 57 to 61, with 35 years of paid contributions.

This decision -- which changes what the Prodi government inherited from its predecessor -- is expected to cost around 10 billion euro in the next 10 years. However the government said this cost will be compensated by other measures.

One centrist minister, former EU commissioner Emma Bonino, offered to resign earlier this week in protest at what she said was the ''conservative, if not reactionary'' left wing getting too great an influence over the pensions issue.

Reuters AM DS1155