MacroScope

East Europe’s pension grabs give pause to reformers

The pension grabs by austerity-averse governments in Poland and Hungary could impact this year’s planned reforms in the Czech Republic, causing another emerging European Union member to soften its approach to a looming debt threat tied to an aging population.

Budapest has already drawn criticism for right-wing Prime Minister Viktor Orban’s plan to seize $14 billion of assets in privately held pension accounts to plug a budget hole without having to cut state spending. Poland’s plans, while not as extreme, have also raised eyebrows. Poles now pay about 7 percent of their paychecks into private accounts, but Prime Minister Tusk is planning to cut that to about 2 percent, taking the extra cash to reduce debt and replacing those funds with future state obligations.

To their credit, all three countries are among a group of nine who have lobbied Brussels, without much effect, for big exemptions to their pension reform costs. But while using funds designated for private pension accounts will cut the budget deficit in the short term, economists say it is only a trade-off between replacing short-term deficits with future pension costs, a good way for governments to stay popular but bad for long-term financial health.

These moves are starting to reverberate for the Czechs, the only country in the EU’s emerging East not to have added any significant fund-based elements to their communist-era pay-as-you-go social security. Parties in Prime Minister Petr Necas’s government had originally planned to create an obligatory pillar in which workers would have to pay at most 3 or 4 percent of their gross salaries into private accounts, unlike the 6-8 percent from the Hungarian and Polish systems.

But Necas is  softening his stance. Although he called Hungary’s moves “incomprehensible” this week, he also said an over-eagerness by eastern European officials to please Brussels and the International Monetary Fund had created unsustainable systems. “In my opinion, it supports our theory that it is perhaps better to give priority to voluntary retirement savings rather than obligatory”, he said.

from UK News:

Has Alistair Darling done enough to revive Labour’s electoral hopes?

So how was it for you?

Chancellor Alistair Darling threw the dice in his pre-budget report in an attempt to bolster Labour's chances of winning the general election in 2010.

From hitting bankers with a one-off bonus tax to lowering bingo duty, Darling played to the Labour heartlands, while hoping to win back voters who have been telling pollsters that they are done with Gordon Brown.

Other measures included the return of full value added tax in January, a 2.5 percent rise in the basic state pension, a 1.5 percent increase in child benefit, as well as help for small businesses and various initiatives to boost the government’s green credentials.