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A man works next a boat at the harbour in Livorno, central Italy, February 14, 2017. REUTERS/Max Rossi

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By Isla Binnie

ROME (Reuters) - Parliament approved on Thursday an anti-poverty package aimed at providing financial relief to the growing number of hard-up Italians battered by years of economic stagnation and high unemployment.

It is the first such attempt in Italy to set up a permanent safety net for poor families, with the lion's share of the national welfare budget traditionally earmarked for pensions.

However, opposition parties say it does not go nearly far enough and the anti-establishment 5-Star Movement (M5S) has promised a much more ambitious "citizen's wage" should it win power at the next election, which is due by early next year.

The government says it will offer up to 480 euros (416.5 pounds) a month to the needy, favouring couples with young children and jobless people aged over 55. It has put aside 1.6 billion euros for 2017 and promises more funding in the years ahead.

The cash will come with strings attached, including demands that dependent children go to school, that they are vaccinated and that the unemployed commit to seeking a job.

"It is basically a programme like the ones almost all European Union countries have, aimed at supporting people living in poverty," Raffaele Tangorra, the Labour Ministry's director general for social policies, told Reuters.

The rate of severe material deprivation in Italy rose to 11.5 percent in 2015 compared with a fall in the EU average to 8.5 percent, latest EU data shows. Those living in "absolute poverty" rose to 4.6 million people, or 7.6 percent of the population, in 2015, up from 6.8 percent in 2014, national statistics office ISTAT says.

Critics of the new law say it barely scratches the surface of the problem, and even the Treasury says that the funds earmarked so far only would only amount to 660 euros per year per family for those classified as worst off by ISTAT.

For years, heavily indebted Italy has focused its welfare resources on the elderly, spending 15.8 percent of its gross domestic product on pensions - the highest ratio in the OECD club of developed nations.

ISTAT says less than 1 percent of welfare spending goes on tackling poverty and social exclusion. Various unemployment benefit programmes do not run beyond two years, leaving many of Italy's army of jobless struggling to make ends meet.

Unemployment has hovered close to or above 12 percent since 2013, while youth unemployment has been stuck around 40 percent.

"There is no doubt that today the great emergency in this country is linked to poverty," Tito Boeri, president of welfare agency INPS, told a Senate Commission in January.

In December, people in the poorest parts of the country registered their discontent with a protest vote at a referendum which forced former prime minister Matteo Renzi from office.

Justice Minister Andrea Orlando, who is running against Renzi to lead the ruling party, said on Thursday the package's approval was an "initial response to the message we received in the referendum".

The law had been waiting for parliamentary approval since last July, but the government is now committed to activating it within six months.

"BIG MOTHER"

The M5S, which heads opinion polls, promises the most comprehensive welfare assistance of any major party, with a pledge to top up a single person's income to 780 euros a month, while a family of four would be guaranteed at least 1,482 euros.

The party, founded by the comic Beppe Grillo, has compared its plan with a pilot scheme in Finland, which earlier this year became the first EU country to offer a universal basic income of 560 euros a month for the unemployed.

The M5S says the scheme would cost 17 billion euros a year, a heavy burden for a nation with one of the EU's biggest debt mountains, but one the party says is worth shouldering.

"A country that isn't able to help the poor isn't ready to take on any challenges whatsoever," said Filippo Nogarin, the M5S mayor of the northern city of Livorno which ran a micro-trial last year in absence of any national programme.

One hundred unemployed residents received 500 euros a month for six months in a scheme which will be repeated this April.

"There are lots of people like me (living in poverty). It was new for us and I was ashamed," said Tito Saccomani, 61, who received the handouts after his decorating firm folded.

"The state should be like a big mother that thinks of everyone as her children and doesn't just act strong with the weak," he told Reuters.

Renzi, locked in a leadership battle within the ruling Democratic Party (PD), has dismissed the M5S plan, saying with a basic safety net now in place, the emphasis should be placed firmly on job creation.

"We need to revolutionise our welfare spending, however, the answer is not a universal wage but work for citizens," he said last month following a fact-finding trip to the United States.

($1 = 0.9459 euros)

(Reporting by Isla Binnie; Editing by Crispian Balmer and Alison Williams)

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