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Pensions a factor amid stability pact revamp

EUROPE – Pensions have emerged as a factor in the wrangling over changes to the European Union’s Stability and Growth Pact, which are expected to be approved today.

"The Council acknowledges that special attention must be paid to pension reforms introducing a multi-pillar system that includes a mandatory, fully funded pillar," the council of EU finance ministers said in a communiqué.

The group – known as Ecofin - said the pact which governs the single currency should not "hamper” reform such as those to pension systems.

"The Council is mindful that the respect of the budgetary targets of the Stability and Growth Pact should not hamper structural reforms that unequivocally improve the long-term sustainability of public finances," the ministers stated.

They said consideration to the net cost of the reform would be given for the initial five years after a member state has introduced a mandatory fully-funded system, or five years after 2004 for member states that have already introduced such a system.

The changes follow five months of negotiations which have seen pact-breakers France and Germany lobbying for a less rigid rules.

Under the new pact, member states over the 3% deficit limit up to five years to recover. Member states could use special circumstances such as structural reforms to legalise their deficit breach.

EU spokeswoman Amelia Torres told IPE: "These reforms, which will have clear positive effects for the long-term sustainability of government finances, will be taken into account in the context of budgetary surveillance."

"In particular, the implementation of such reforms will allow deviation from the medium-term objective or from the adjustment path towards it."

Torres said the European Council was expected to endorse the changes this evening.

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