Correspondent's Choice

This story about pension reforms was published on 14th December 2010 by EurActiv.

The European Commission confirmed yesterday (13 December) it had reached an agreement with Poland on giving countries that have reformed their pension systems more leeway over fiscal policy. In the meantime, the parliament in Budapest voted to effectively dismantle pension reform. The issue will be on the agenda of EU leaders at their 16-17 December summit.

The European Union’s executive arm gave few details about the deal, which emerged on Friday, saying it needed unanimous backing from the EU’s 27 finance ministers.

The Commission said that when assessing whether a country should face EU budget discipline steps, the EU executive would take into account whether the state had carried out pension reform.

“The assessment would be carried out on a case-by-case basis. It will take into account whether the [budget] deficit is justified by systemic pension reform,” Commission spokesman Amadeu Altafaj told a regular news briefing.

Commission President José Manuel Barroso and Polish Prime Minister Donald Tusk clinched the deal by telephone late on Friday. Barroso will send a letter to Tusk with details on Monday or early on Tuesday.

Polish officials have said the agreement would allow Poland to have a budget deficit of up to 4.5% of economic output, 1.5 points more than the official ceiling, without facing the EU’s disciplinary steps.

Altafaj would not confirm the figure and said that to count on leniency, a country’s public debt must be below 60% of gross domestic product.

As part of its reform from late 1990s, Poland is transferring sums worth up 2.5% of GDP annually to private pension funds which invest them in securities, mainly Polish treasury bonds.

EU disciplinary steps could in principle lead to fines for eurozone members and freezing some EU aid for other countries of the bloc.

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