ROME - Italian Prime Minister Giorgia Meloni is set to introduce a new welfare subsidy for the low-income elderly, according to a draft decree seen by Reuters on Thursday, as part of a broader plan worth more than 1 billion euros ($1.09 billion) over two years.

Ageing population and low birth rates are a major worry for the euro zone's third-largest economy, leading to falling productivity and higher welfare costs in a country where more than a third of residents are expected to be over 65 by 2050.

The government was set to present the package at the end of a cabinet meeting later on Thursday.

Among several measures, the scheme envisages a so-called monthly "universal benefit" of 1,000 euros to support poor people over 80 with "very severe welfare needs," the draft said.

The benefit will be paid starting from Jan. 1 2025, and will remain in place until Dec. 31 2026, the document added.

With a median age of 48, Italy is the EU's oldest country, and also has the highest old-age dependency, defined as the ratio of people aged 65 and over to those of working age, according to statistics agency Eurostat.

Pensions already eat up more than 15% of gross domestic product (GDP), and the Treasury expects spending to reach 17% of output in 2042.

This makes it harder for Rome to reduce its public debt, which at around 140% of GDP already is the second highest in the EU and drains resources from other areas such as education and childcare.

In its 2024 budget, the government earmarked around 1 billion euros for several measures aimed at addressing Italy's demographic crisis. One temporarily removes social contributions paid by working mothers with at least two children. REUTERS