Italy: Meloni pressured by welfare cuts and slowing economy

As July drew to a close last week, some 160,000 people in Italy found out their welfare payments would be cut. The news came to many via text message, a method one opposition politician described as "brutal."

On Monday, protesters in Naples took to the streets in response, with one demonstrator branding Prime Minister Giorgia Meloni "Robin Hood in reverse," telling broadcaster RAI she was, "taking from the poor and giving to the rich."

The cuts may have sparked anger, but they were not unexpected: Meloni and her far-right Brothers of Italy party campaigned on a promise to restrict social benefits — now she is putting that plan into action.

The government is phasing out a basic income support scheme for low income households rolled out in 2019 and replacing it with two somewhat more restrictive schemes. The goal, Meloni said when announcing the reform last year, is to "transform welfare assistance into work."

But with recent data pointing to an unexpected economic slowdown and her predecessor Giuseppe Conte accusing her of orchestrating a "social and economic disaster," Meloni is facing extra pressure to prove her ideas for boosting growth will deliver.

Why is the Italian government restricting welfare benefits?

The Italian government argues the previous poverty relief scheme, known as the "citizen income," was ineffective since most beneficiaries did not find jobs. "We established the principle that the state will take care of some Italians forever," Meloni said in a 2022 press conference, "I believe the state should take care of helping them find jobs and improve their conditions, rather than keeping them in the same situation."

Some business groups also reportedly lobbied for reform, arguing the payments were disincentivizing people from seeking work.

Francesco Corti, an analyst with the Centre for European Policy Studies (CEPS), told DW the new plan to restrict benefits represents a "paradigmatic shift" away from a more universal approach. "The idea is that you can draw a line between people that are employable and people who are not," he said.

Around 1.7 million low-income households received average monthly citizen income payments of €550 ($602) last year, according to Italy's welfare benefits agency INPS. The government put no time limits on how long citizens could receive benefits, so long as they did not turn down job offers.

Under the reforms, those now deemed physically able to work will receive a lower monthly amount of roughly €350 ($383) for a maximum period of one year, provided they enroll in a training course. The change follows heated public debate in Italy, with accusations of benefits fraud and laziness being levelled at recipients, many of whom are in Italy's less economically-prosperous south.

Italy's deep north-south economic divide

The European Union's official network of employment services, EURES, describes the Italian labor market as one which "differs widely" according to geography. "Industrial activity is mostly concentrated in the north, while people in southern regions mainly work in agriculture and tourism," the agency's website reads.

Those differences translate into inequalities. The northern region of Lombardy, which includes financial hotspot Milan, recorded an unemployment rate of 4.9% last year according to EU data, similar to the figure of 4.8% for the Berlin region of Germany.

But cast an eye further south and the story is markedly different: Last year, unemployment stood at 17.1% in Campania and 16.6% in Sicily. The difference in those southern regions is even more stark for people below the age of 29 — with more than one-in-three classed as unemployed last year. Still, the nationwide unemployment rate in Italy is falling.

Milan-based political scientist Paola Mattei fears the government's new policies fail to address the challenges presented by the nation's deeply-ingrained north-south divide. 

"I think their ideological view is that poverty is really a choice mainly, and if you're young, if you're able, if you're healthy, you will find a job, which we know is not the case in some parts of the country," she told DW. "There are areas of Italy in which it is not a choice: No matter how educated you are, you're not going to find a job easily because there is no industry there and there is no demand for jobs."

Italian economy shrinks, Meloni stays stable

Welfare recipients were not the only Italians who received unwelcome news this week. Economists had predicted zero growth for Italy in the second quarter of 2023, but data released Monday showed the Italian economy unexpectedly shrank by 0.3% — while GDP in the Eurozone as a whole grew 0.3%.

Opposition politician Ubaldo Pagano from the center-left Democratic Party quickly accused those in power of mismanagement: "If after two years of solid and sustained growth we sink to the bottom of the EU rankings — faring worse than Germany, France and Spain — it's undoubtedly down to the choices made in recent months," he told Italian news agency AGI on Monday.

Meloni's government recently registered a three point drop in approval ratings, falling to 49% in July, according to Ipsos polling data. Surveys aggregated by news outlet Politico also show that while her far-right Brothers of Italy party has consistently polled around 29% since January, support for the opposition Democratic Party jumped from 16% to 20% in the same period.

But Meloni herself maintained 52% popularity rating last month, in line with figures since the start of the year. Researcher Paola Mattei thinks some notable recent events have sheltered the premier's political image — namely, the release of a new round of EU recovery funds for Italy, and a recent trip to Washington, where she was welcomed by US President Joe Biden.

"At a time when the economy is slowing down, when anti-poverty measures are significantly reformed… she decides to bolster her international credibility," Mattei said. But the analyst predicts the next few months may prove more challenging for Meloni.

"We will see more social unrest in the autumn. The trade unions have already announced a 'hot autumn' of protests. Therefore, I think the reality on the ground might be very different from the international credibility that she has —  successfully, I think — managed to establish in Washington."

Edited by: Jon Shelton