Hungary-Poland: Private pension funds seized
14 December 2010
“Hungary nationalises private pension funds,” exclaims Czech daily Hospodářské noviny. On 13 December, the Hungarian parliament approved a law to enable the government to take control of mandatory private pension funds, which will now be reintegrated in the country’s public pension system. In so doing, the conservative administration has effectively reversed a reform undertaken 12 years ago which Prime Minister Viktor Orbán qualified as an "experiment that transformed the Hungarian pension system, which resulted in the country sinking in debt up to its ears."
The state is planning to use the recovered money as “a stopgap” to reduce public debt (which stands at approximately 80% of GDP) and the country’s spending deficit, in line with promises made to the EU and the IMF. The measure, which will come into force at the end of January, could result in lower pension payments. As Hospodářské noviny remarks, "Hungarians did not have much confidence in their public pension system, which is why they preferred to establish private funds. Now whatever confidence they have is almost non-existent.” The Czech daily adds that “in the wake of the pension funds, everything is up for nationalisation.” As it stands, “the only Hungarians can be sure of is that their pensions and savings are now in doubt.”
In response to a similar situation, Poland has adopted a different strategy. On 10 December, Donald Tusk’s government reached an agreement with the European Commission that will enable it to take into account the costs of its reformed pension system when calculating its public debt and spending deficit. As a result, Poland will now be able to report a debt of less than 40% of GDP instead of 54%.
However, Dziennik Gazeta Prawna argues that the successful negotiation of the agreement “could prove to be a curse,” because the changes to the reporting method will not actually reduce the volume of debt and “could enable the government to increase debt without being punished for it.”