Taking centre stage in Europe
With the new year, the rewriting of the rules governing the single currency takes centre stage in the pension debate, with a number of member states clamouring that they should be given more time to get their public pension systems in order. Also, the European Parliamentary Pension Forum (EPPF), initially set up a year ago, is being relaunched with a more social face.
Countries that are looking for some EU support in restructuring their over-worked pension systems could find it in the rewriting of Europe’s euro rules, which were being intensely debated in Brussels earlier this year.
The EU is considering a shake-up of its stability and growth pact (SGP), which puts a cap on the amount of debt countries can owe, after several member states ignored the rules.
Jean-Claude Juncker, the Prime Minister of Luxembourg, which holds the presidency of the EU for the next six months, is wary about weakening the SGP too much, both rejecting Germany’s demands that its big net contributions to the EU budget be taken into account, and France’s plea for military expenditure to be exempted from the deficit calculations.
However, on pension reform, a highly political issue that affects every member of the EU, he seems to take a much softer line. He suggests that countries investing in long-term structural reform, or investing for the future, would be given more time to get their books in order.
Joaquín Almunia, the commissioner in charge of monetary policy, takes a similar view. At a recent breakfast briefing, he stressed the importance of long-term stability over short-term debt. But he erred on the side of caution when he advised that low debt levels are essential for tackling an ageing population, and ensuring that there is enough slack in the economy for increased expenditure on pensions.
Europe’s banks, however, take a much stricter view of the need for fiscal stability. “We need lower, not higher, deficits for countries with more demographic problems,” Martin Hüfner, chairman of the European Banking Federation’s economic committee says. He proposes lowering the deficit limit to 2.5% or even 2% - it is currently 3% - for countries where a rapidly ageing population is taking a serious toll on the economy.
It is no surprise that the country calling loudest for pension expenditure to be exempted from the rigours of the SGP - Italy - is also the country with the highest expenditure on pensions as a proportion of GDP at 14.7%. France and Germany, who also spend a large amount on pensions (13.2% and 13.1% of GDP respectively) reportedly side with Italy.
During his end-of-year speech for 2004, Italian premier Silvio Berlusconi stressed, not for the first time, that the rules should be loosened up in Italy’s case, to allow the country time to get its pension system in order. His finance minister, Domenico Siniscalco, expressed a similar view before the national parliament last December, saying that the rules on the public debt level should also consider “implicit indebtedness such as future pension and health spending burdens”.
With the new European parliament now in full swing, Dutch Socialist MEP Ieke van den Burg has decided to relaunch the parliament’s pension forum (EPPF), which was set up a year ago as a discussion group for interested parties to follow the pension debate in Europe.
Van den Burg, who will reprise her previous role as president of the forum, wants the group to focus more on social issues than purely on financial markets, as it has done in the past. “I feel it is necessary to have more debate on these issues and to see pensions in a broader context,” she explains. But a more socially-oriented agenda may alienate others who sit on the forum’s steering committee, sources say.
The main issue that the forum will be dealing with in the coming months is the forthcoming commission proposal for a directive on pension portability, expected some time in March or April.
The forum will also look at the implementation of new rules governing occupational retirement provision - the IORP directive - which should be on all national statute books by September.
The EPPF will ensure that it involves the UK in the pension debate, as Britain takes obver the presidency of the EU in June. The UK presidency will deal especially with the importance of providing adequate information about pension provision to Europe’s citizens, according to a spokesman for the UK’s Department of Work and Pensions.
Geert Waelkens, one of the organisers, says that the aim of the forum is to provide a platform for discussion, and not to take one side or the other. He stresses that membership is open to all, although the group does have a steering committee which includes representatives of the Committee of European Assurers and the European Federation for Retirement Provision.