EUROPE – The World Bank says the European Commission’s way of furthering pan-European pension reform may be “insufficient” – and that its projections on ageing are “very optimistic”.
The World Bank has criticised the Commission’s so-called “open method of coordination”, or peer review, way of furthering pension reform in a new book.
“We conclude that, although useful, the process may be insufficient to produce rapid and comprehensive European reform,” write Robert Holzmann, Landis MacKellar and Michal Rutkowski in “Pension Reform in Europe: Process and Progress”.
Not only that, but the method is flawed in another way, they say. “The method will not create a vision for a pan-European reform.”
“The open method of coordination was initiated by the EU member countries to avoid any discussion about a pan-European blueprint or benchmark for pension reform.
“Given the diversity of pension systems in the EU, any suggestion along such lines would have elicited political opposition by member countries and an end to further common reform discussion among them.
“But will mere competition between European pension systems help move countries toward a more harmonized scheme?”
And they add that the European Union’s Economic Policy Committee has used “very optimistic assumptions that are not truly baseline (as they already imply a policy change to take place)”.
The authors question the EPC’s forecast that EU pension expenditure will rise to “only” 13.6% of gross domestic product in 2040, from a current 10.4%.
“The EPC commissioned and published their optimistic projections as part of the politics of the EU pension reform process,” they write.
Moreover, labour mobility is being hampered without a pension system that allows “for full labour mobility across professions and states”. “Therefore the EU does not have a harmonised, even less a coordinated pension system, which characterised other economically integrated areas under a common currency (such as Brazil, Canada, Switzerland and the US).”
They say Europe is facing a three-pronged attack on its pension systems – from increased budgetary pressures, socio-economic changes and the impact of European economic integration.