Kaczynski May Divert Polish Pension Cash to State Projectsby
Poland’s privately run pension funds are now ‘losing value’
Kaczynski seeks economic order based on government investment
Poland is considering diverting funds from the country’s $35 billion pension industry and piling them into government-backed projects, ruling party leader Jaroslaw Kaczynski said.
Poland’s privately run pension funds, set up in 1999 to provide long-term financing for the nation’s companies and make Warsaw into a regional capital hub, own a fifth of the shares traded on the Warsaw stock exchange. The proposed shift of money from the funds could help the eight-month-old government fulfill its election promises, including higher social benefits, cheap housing as well as state-backed investments into industries ranging from ship building to the production of coal and electric buses.
“We must think what to do with the money in the pension funds, there are already proposals,” Kaczynski, who was reappointed as head of the Law & Justice party on Saturday, said at the party’s congress. “That money is now losing its value,” while it could be the “basis for new, important investments, that will help build strong economic policy and support millions of Polish households.”
Kaczynski said his party seeks to implement a new “economic order,” one based on redistributing wealth and rejection of free-market reforms. The Law & Justice government imposed the European Union’s highest levies on banks, rolled out unprecedented child benefits and is in a stand-off with the EU over democratic standards, which triggered the country’s first-ever credit rating downgrade and spooked investors.
Warsaw’s broad WIG index has dropped 16 percent in the past 12 months, compared with a 9.5 percent decline in the MSCI emerging-market index, adjusted for currency swings. The zloty currency weakened 3 percent against the euro in the April-June period, it’s biggest quarterly retreat since 2013, amid concern about Britain’s decision to leave the EU and investor worries that government policies will lead to a bigger budget deficit.
Poland may consider merging all 12 of its funds into one entity, which would be managed by state-controlled insurer PZU SA or government lender Bank Gospodarstwa Krajowego, daily Rzeczpospolita reported on May 27, citing sources it did not name. While Kaczynski didn’t specify how the industry should be overhauled, Deputy Labor Minister Marcin Zieleniecki said on May 31 that the funds’ stock-focused portfolios aren’t “efficient.”
The pension funds went through an overhaul two years ago. They were stripped of 51 percent of their holdings in bonds in 2014, when a previous administration sought to reduce the country’s debt burden.