The minimum pension will be increased from next year the Italian government and the unions agreed.

Around three million people with a pension lower than €654 per month will see their benefit rise by €33 on average after the age of 64.

The agreement was reached after "a long day of negotiations", the government said in a statement.

The increase will cost €1.3bn next year, the government disclosed.

"It is an important step which will open the way to a total agreement also on other topics of the negotiations," said labour minister Cesare Damiano.

A few weeks ago a dispute over the increase in retirement age led to a complete halt in the negotiations on pension reform.

From next year, the statutory retirement age is set to increase from 57 to 60 years. Trade unions want the law replaced with regulations for a more gradual increase.

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