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Polish Central Bank, Watchdog Join Pension-Revamp Criticism

Oct. 29 (Bloomberg) -- Poland’s central bank and its financial-markets watchdog said a planned overhaul of the country’s privately managed pension system may carry legal risk, adding to criticism from state lawyers.

The government should “reconsider” banning retirement funds from investing in state bonds and forcing them to keep 75 percent of assets in stocks in the next two years, according to a central bank opinion published today on the Labor Ministry’s website. In a separate opinion, the Polish Financial Supervisory Authority called the proposed changes “ economically and legally questionable.”

The State Treasury Solicitors’ Office, which represents the government in legal disputes, said yesterday the plan may be “unconstitutional” and is a “classic form of expropriation.”

Poland plans to take over 51.5 percent of private pension assets, mostly government bonds, to reduce public debt and ease fiscal pressure as the economy recovers from its steepest slowdown in a decade. The government is gathering views on the pension bill before it’s sent to parliament in mid-November.

There’s no risk the revamp will be deemed unconstitutional, Jan Krzysztof Bielecki, who heads Prime Minister Donald Tusk’s council of economic advisers, told reporters today. “It has to be established what the grounds are for such an opinion.”

Seeking Leeway

By tapping 13 funds, which invest mandatory contributions from 16.2 million members and control $94 billion of assets, the government is seeking more leeway to boost spending. Tusk faces general elections in 2015 and his party lags behind the opposition in opinion polls.

The overhaul will trim the public debt ratio by 9.2 percentage points next year and bring the budget into a surplus of 4.5 percent of economic output from a 4.8 percent deficit projected for 2013, according to the Finance Ministry.

The planned cancellation of government bonds held by the funds would reduce liquidity on the local debt market and increase the share of foreign ownership, according to the financial watchdog.

The owners of the companies running the funds include Aegon NV, Allianz SE, MetLife Inc., Aviva Plc, Axa SA, Assicurazioni Generali SpA, ING Groep NV and Nordea Bank AB.

Axa’s Chief Executive Officer Henri de Castries said last month that his company will become “very aggressive from a legal standpoint” if the law is introduced. The Polish Chamber of Pension Funds asked European Commission President Jose Barroso in a letter to “closely analyze” the plan and “take appropriate actions.”

To contact the reporter on this story: Piotr Skolimowski in Warsaw at

To contact the editor responsible for this story: Balazs Penz at

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