Poland made little progress toward winning new European Union rules that would let it deduct the costs of switching to privately financed retirement savings from its official budget deficit and debt.
Poland has been fighting to get the EU to recognize that fund payments shouldn’t automatically add to the budget deficit and public debt.
EU finance ministers refused to offer guarantees that the short-term increase in government outlays would be deducted from Poland’s debt. Instead, they pledged a case-by-case assessment of compliance with the EU debt target of 60 percent of gross domestic product.
“There’s been quite considerable progress; considerable but insufficient,” Polish Finance Minister Jacek Rostowski told reporters today following a meeting of EU finance ministers in Brussels, adding that “there is quite a high degree of receptivity among member states.”
Nine EU nations spearheaded by Poland want to change the way their public debt is calculated because the current method punishes countries that overhauled pensions by setting up private funds.
They sent a letter to the European Commission and EU President Herman Van Rompuy in August, saying members should be allowed to account for the cost of overhauling their pension systems. Hungary, the Czech Republic, Romania, Slovakia, Bulgaria, Lithuania, Latvia and Sweden also signed the letter.
“We are quite close to a reasonable and balanced compromise,” EU Economic and Monetary Commissioner Olli Rehn said told reporters in Brussels today. The goal is to maintain “simple and rigorous rules on the one hand and taking into account the need to have strong incentives for systemic pension reforms.”
Poland would escape closer EU surveillance in cases where the pension costs push its deficit “somewhat above” the limit of 3 percent of GDP, Rehn said.
Bulgaria said in October it may transfer some of the private pension funds to the state to bridge its deficit. Hungary has made steps to renationalize its private pension funds worth 3 trillion forint ($14 billion).
Prime Minister Viktor Orban’s administration gave citizens an ultimatum on Nov. 24 to move their pension savings from private funds or lose their public pensions.
Poland doesn’t plan any steps to dismantle private pension funds like Hungary, Rostowski said today. “Poland is certainly not planning a reversal of the Hungarian kind.”