Bank of Italy cautions against cuts to anti-poverty subsidies

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ROME (Reuters) - Italy's poorer households may struggle to get by as its right-wing government proceeds with plans to cut anti-poverty subsidies, a top central bank official warned on Monday.

Prime Minister Giorgia Meloni's 2023 budget will limit handouts under the so-called "citizens' income" next year ahead of scrapping the scheme altogether in 2024, when it will be replaced by a new measure yet to be detailed.

The move could penalise "families hardly able to find an alternative source of income on the labour market," the Bank of Italy' head of economic research Fabrizio Balassone told parliament during testimony on the budget.

This was "even more so in the context of a slowing economy and of a significantly increasing cost of living," he added.

Italy's annual inflation rate stood at 12.5% in November, while the Treasury estimates that the economy will shrink in the current quarter and the next.

Meloni has always criticised the citizens' income, which was introduced in 2019, arguing that able-bodied people of working age should not be allowed to depend on subsidies indefinitely.

In 2023, payments will be withdrawn after eight months except for households with children, people aged 60 or above, and the disabled.

Balassone said the changes should result in savings of 0.7 billion euros in 2023 and 1 billion euros in 2024 and in 2025.

According to the head of national statistics agency ISTAT, Giancarlo Blangiardo, the cut will affect around one in five beneficiaries of the citizen's income, or some 846,000 people.

"A fair state should not assist in the same way those who can work and those who cannot," Meloni said in a video posted on Facebook on Sunday.

The premier said her government would help working age people get out of poverty by helping them find a job, "as long as, of course, they are willing to work."

(Reporting by Alvise Armellini, editing by Gavin Jones and Bernadette Baum)