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Italy’s state-backed fund for layoffs is disguising the true rate of joblessness, masking the severity of the worst recession in 60 years by allowing companies to retain workers without paying them.

The CHART OF THE DAY shows Italy’s real unemployment rate in red, calculated by adding laborers paid by the fund known as cassa integrazione, or CIG, to the official rate, in green. The euro-area average is in blue. The CIG pays laid off employees about 80 percent of their salaries for as long as two years.

“It’s an Italian vice that has taped over the holes, hiding the real situation,” Tito Boeri, professor of economics at Bocconi University in Milan, said in a telephone interview. “During the crisis the government has extended the use of what should only be a stopgap measure.”

The official unemployment rate rose in November to 8.3 percent, the highest level in more than five years. The average for the 16 countries sharing the euro is 10 percent guaranteed personal loan approval. Italy’s real unemployment rate is more than 10.7 percent, according to Bloomberg calculations that include numbers provided by INPS, the Rome-based agency that handles the welfare payments.

Italian companies’ use of the CIG fund quadrupled to almost 1.5 billion euros ($2.2 billion) in 2009 from 365 million euros in 2008, according to Bloomberg projections based on the cost of the fund in 2008 and the number of hours covered by CIG subsidies approved in 2009. The official cost of the CIG in 2009 will be published in the annual report of INPS later this year.

Under Italian law, businesses suffering from a downturn can lay off permanent employees for as long as two years and take them back when conditions improve. CIG aid can be extended to five years if the government decides that circumstances are “exceptional.”

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