Austria agrees to less drastic pension overhaul
AUSTRIA – The Austrian government yesterday agreed to overhaul its pensions system, although conceded that some of the current proposals would be amended to be less drastic.
Following criticism from the Freedom Party, Chancellor Wolfgang Schuessel of the conservative People’s Party has accepted a more gradual increase of the age of retirement.
The age of retirement for men will be increased from 61.5 years to 65 years, and the age of retirement for women will be increased from 56.5 years to 60 years. The increases are now to be introduced gradually from July 2004 to 2013.
Those who decide to retire early will see reductions in their gross pensions increased to 4.2% from the current 3.75%. On the other hand, those retiring later will receive a bonus.
Other reforms agreed yesterday include a reduction in the rate of contribution increase from 2% to 1.78%. Rather than taking effect in 2004 as proposed, the reduction will now be made in four gradual steps up to 2006.
Pension calculations are also to be amended.
Although the changes to the reform mean that savings for the government budget from 2006 onwards will be reduced from 1.1 billion euros to 700 million euros, the European Commission today praised the reforms in terms of Austria’s commitment to the stability and growth pact.
“Austria’s_stability programme deserves credit for presenting a major reform of the public pension system. If fully implemented, this would help considerably to put Austria’s public finances on a sustainable footing in the longer term,” said an assessment report by the European Commission.
Austria’s debt-to-GDP ratio is expected to fall below 60% by 2007. It is presently at almost 68%. Deficits over the entire programme period are foreseen as exceeding 1% of GDP in three out of the five years. The Council will adopt a formal opinion regarding the programme on May 13.
Austria’s pensions reforms will be presented in Parliament June 14.
Unions have already organised a protest against the reforms. Several thousand public sector workers in Austria’s capital, Vienna, will be striking on May 6.