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October Deadline Set for Pension Reform
Prague Daily Monitor
Czech Republic
July 18, 2005
Politicians will try to agree on the principles of the Czech pension reform by 31 October, Prime Minister Jiri Paroubek (CSSD) said after a meeting with representatives of the coalition and opposition parties Friday.
He added that each of the five parties will assign one representative to negotiate on the issue.
A team of experts, which has made calculations on the future pension system based on ideas put forward by various political parties, should resume its activities. The team had been headed by Vladimir Bezdek from the Czech National Bank, but now will be led by Labour and Social Affairs Minister Zdenek Skromach (CSSD), Paroubek said.
The meeting on Friday was also attended by the chairman of the senior government Social Democrats (CSSD) Stanislav Gross, head of the deputy group of the senior Civic Democrats (ODS) Vlastimil Tlusty, the chairman of the junior Christian Democrats (KDU-CSL) Miroslav Kalousek, the deputy chairman of the junior opposition Communists (KSCM) Vaclav Exner, the chairman of the junior ruling Freedom Union-DEU Pavel Nemec, and Bezdek.
Politicians agreed with the team's final report that pension reform must be carried out.
Though the current system will remain solvent for another 15 to 20 years, the Czech population is ageing. People over 60 now constitute about one fifth of the population. In 60 years that figure will rise to one third. Thus, the number workers paying into the pension system will decline.
Kalousek said that the parties should agree on what amount of GDP will flow to the pension system. At present its 8 percent.
Politicians also must determine the share of the state pillar, or pay-as-you-go system method, and the payments made to funds. They should also set retirement age and the degree of solidarity.
The positions of the five parties in parliament markedly differ. The CSSD advocates for personal accounts while the level of payments made would be reflected in the pension level.
The KDU-CSL would like people to be able to entrust a part of their payments to private funds while the pension people would get from the state would be lower.
The Freedom Union-DEU has a similar proposal, but it proposes a private payments scheme.
The ODS bases its proposal on a low flat pension and lower payments.
The ODS has already started to negotiate with the KDU-CSL, its possible government partner after the 2006 elections which the ODS is expected to win, on bringing the two parties' proposals into harmony.
The Communists have said they would not change the current system significantly.
Kalousek said that it is obvious that the pension reform bill will not be passed by the 2006 general election. He said that it is not possible to find agreement between all five party proposals.
Exner said that the pension system should be adapted to changed conditions, but this does have to "necessarily mean" a complete change.
Paroubek said that if politicians fail to keep the deadline set for formulating the principles of the reform, the deadline can be extended. He said he believes the parties are able to reach some kind of agreement before the elections.
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