Struggling with budgetary pressure at home, Hungary and Bulgaria have nationalised their pre-funded pension schemes and excluded the cost of the reform from their public debt figures, opening a row with the European Commission. The EurActiv network reports. In November, Hungary and Bulgaria came up with very similar policies that have surprised the European Commission, which is attempting to provide an EU-wide solution to pension reforms in the EU's revised budget rules.
Both countries decided to nationalise their pre-funded pension schemes, thus artificially reducing both public deficit and debt as calculated by the Maastricht criteria. "We are concerned about the latest announcement by the Hungarian authorities regarding the pension system," said Amadeu Altafaj Tardio, spokesperson for Economic and Monetary Affairs Commissioner Olli Rehn.
Tardio told EurActiv the Commission was concerned that the wealth accumulated in pension funds would be used to finance current expenditures, artificially reducing public debt and deficit figures in the short term but putting the long-term sustainability of public finances in jeopardy (see Positions below). At a meeting in October, EU leaders decided to exclude the cost of pension reform programmes from public debt and deficit figures.
At the two-day meeting, a group of nine EU member states from the former communist bloc demanded that the cost of reforming their costly pension systems be excluded from EU budget rules. But the meeting's conclusions merely invited the EU Council of Ministers to speed up work on how pension reforms can be integrated into the EU's revised Stability and Growth Pact.
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