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Senior economist says directive can't be blocked

EUROPE – Countries that are already reforming their pension systems will probably have the edge in future debates over a union-wide retirement system, according to Elisabeth Legge, senior economist at the European Economics and Financial Centre.

In a speech at a London conference entitled ‘New developments in global capital markets: opportunities and prospects‘, Legge outlined the economic implications of the European Commission’s (EC) forthcoming pensions directive as well as some of the related issues facing institutional investors.

Many governments oppose the proposals because telling the voters that they have to save for their own pensions is not a “vote-catcher,” says Legge. The unpopularity of cutting benefits has been solved in some countries by introducing tax-incentives on pensions savings: Germany is paying some DM20bn to cover the cost of its pension reform “carrot,” she adds.

Another headline grabbing event resulting from the EC proposals, Legge says, would be the possibility that pension providers could abandon non-reformist member states to offer services from a neighbouring country.
She also warned that, since the introduction of the single currency, some stock markets have started to fall, while others have continued to rise: a trend she describes as a divergence parallel to the uneasiness of the pension provision industry.

Despite member state disapproval, Legge believes that national governments cannot prevent the pan-European legislation because it is “tagged” to the existing directives of freedom of movement and the single market.
However, she described EC Commissioner Frits Bolkestein’s plan as “a disparate patchwork of proposals because of a horse-trade between Brussels and the member states, which is shot through with get-out clauses.”

Before a union-wide consensus on retirement can be reached it is necessary to solve the debate on whether to tax contributions or benefits of workers.
Says Legge: “There is absolutely no way that these two solutions can be harmonised into a pan-European system.”

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