Italy’s Enel agrees early retirement for 3,500

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Italian power company Enel has reached a deal on early retirement for almost 10 percent of its domestic workforce, the largest agreement of its kind since the government overhauled Italy's pension rules, a labour union source said.

With the Italian economy in its longest recession since World War Two, Enel has suffered a steep decline in demand for gas and electricity at home and is now looking to newer markets such as Latin America for growth.

The country's biggest electricity provider will make up pension contributions and cover extra costs imposed on 3,500 workers taking voluntary early retirement under legislation passed last year by the government of former prime minister Mario Monti.

"It's the first time such a large number of people make use of this new law," the union source said on Friday.

Enel shares were up 0.4 percent at 2.948 euros at 1325 GMT. An index of European utility companies was flat.

Underlining Enel's problems, a survey showed last week that Italian manufacturing declined in April for a 21st consecutive month. New Prime Minister Enrico Letta wants to cut taxes to help revive the euro zone's third-largest economy, but has still not indicated how he will pay for it.

The new pensions law raises the retirement age to ensure the state pension system is not blown apart by an ageing population. It allows workers to leave on a full pension before the normal retirement age as long as they have paid contributions for the necessary minimum number of years.

The new regulations still impose several restrictions on early retirement agreements and there is little sign that other Italian companies are rushing to strike deals similar to Enel's.

But early retirement remains a more attractive option than redundancies for Enel, in which the state holds a controlling 31 percent stake.

Enel has been reluctant to impose redundancies on its 36,000-strong Italian workforce but has long encouraged older workers to leave early under individual early retirement deals.

More than a quarter of all terminations in the company's global workforce of around 74,000 last year were in Italy, with most of these due to voluntary early retirement, according to the company's 2012 annual report.

As part of the new agreement, Enel expects to hire around 1,500 younger workers under new labour market provisions intended to encourage apprenticeships, according to a company source.

The new pension rules impose penalties on workers who leave before they reach 62. But these can be made up by the company, which can also cover pension contributions for departing workers during the gap up to their normal retirement age to ensure they get a full pension.

Under the agreement reached with Enel's unions, which still requires approval from the Labour Ministry, Enel will make up the additional costs for the departing workers and provide other incentives including health benefits.