The European Round Table of Industrialists (ERT) has warned governments that they risk squandering a “limited window of opportunity” to undertake serious reforms of their pensions programmes, if action is not taken soon.
However, the influential lobby group, which is made up of 46 of Europe’s top business chiefs, has welcomed the decision of the Swedish government to put pensions reform on the agenda at this week’s Stockholm summit of European heads of state.
But in a call to member states ahead of Stockholm, the ERT asserts:
“ There are political costs in substantive pensions reform because resources have to be redistributed across generations and benefits take a long time to appear. But these costs will be lower over this decade, which is the final ten years before the post-war “baby boom” generation starts to retire. Governments must not waste this opportunity and load unfair burdens on future generations of employers.”
The ERT also argues that reforms so far launched fall short of what is needed to alleviate the financial risks inherent in Europe’s public pensions systems.
Significantly, it singles out legislative tweaking in Germany, Austria, Belgium, Finland and Italy, as being flawed in the long run.
“ For the most part, these mini reforms increase contribution rates or affect benefit computation rules by very gradual increases in the normal retirement age.”
Consequently, the ERT says that when it comes to improving the pensions portfolio of European citizens – the most widespread recommendation from all quarters – nothing is being done in southern Europe to compare with major structural changes that have occurred in the UK, Netherlands and Sweden.
The ERT also suggests that political obstacles to fundamental change may not be as insurmountable as many policy-makers think.
Citing a report by the Fondazione Rodolfo Debenedetti, which asked citizens in France, Germany, Italy and Spain to consider the question of intergenerational redistribution involved in public pension reform, the lobby group says replacement of a pay-as-you-go (PAYG) pension system with a fully funded regime would need three essential provisos to make it more politically feasible.
1) That it is accompanied by a massive information campaign about the current and future costs of public pensions.
2) The changeover is base on a long transition and requires workers to save rebated contributions.
3) The changes are integrated into broader reforms of welfare systems.