Italy court rules pay cuts for state high earners are illegal

Reuters News
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Posted: Oct 11, 2012 9:53 AM
Italy court rules pay cuts for state high earners are illegal

ROME (Reuters) - Italy's top court ruled on Thursday that cuts to the pay of high earners in the public sector ran counter to the constitution.

The judgment underlines the difficulties of cutting spending and diluting privilege in the euro zone's third largest economy.

The constitutional court rejected a measure in an austerity budget approved in 2010 that imposed cuts of 5 percent on public sector pay above 90,000 euros ($116,000) per year and 10 percent above 150,000 euros.

The pay cut, which would have affected salaries in 2011-2013, "has an unreasonable discriminatory effect", the court ruled.

The measure would have yielded relatively modest savings - some 48 million euros up to 2012 - but was welcomed by many ordinary Italians as a rare example of the better off being forced to contribute to fixing the country's finances.

It was defined as a "solidarity contribution" by the government of Silvio Berlusconi which drew up the budget.

Pay has been frozen in the public sector for several years as part of austerity measures to rein in Italy's huge debt, but state workers are still widely regarded as privileged.

They were excluded from a labor market reform adopted by Mario Monti's government this year which eased dismissal restrictions in the private sector.

($1 = 0.7751 euros)

(Reporting by Giuseppe Fonte, writing by Gavin Jones, editing by Robert Woodward)