Court Ruling Coming on Poland Pension Overhaul

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Poland’s top court on Wednesday will rule on the constitutionality of the country’s sweeping 2013 pension overhaul.

If the overhaul is reversed, it could drive Poland’s debt beyond legal limits, which automatically triggers austerity measures.

The country’s officials are confident the reforms will be upheld.

More details from Bloomberg:

The Constitutional Tribunal in Warsaw is set to rule on Wednesday on questions relating to the revamp, including one that could lead to the law’s effective reversal. The government took over and canceled 153.2 billion zloty ($39.3 billion) of its bonds held by privately managed pension funds two years ago, lowering public debt and leaving the funds with stock-heavy portfolios.

A ruling making significant parts of the overhaul illegal could force the government to increase bond issuance and push Poland’s public debt over legal limits, triggering austerity measures.

“I’m rather confident about the court’s decision, as the changes in pension funds protect the interests of taxpayers on one hand and those of retirees on the other,” Finance Minister Mateusz Szczurek said in an interview on public radio on Tuesday. “If the whole reform was overturned, a lot of laws will also have to be overturned, not least the debt thresholds.”

The government-sponsored changes to the country’s three-tier pension system have sparked controversy, including concern that canceling bonds would amount to uncompensated expropriation.

The government took over and canceled 51.5 percent of assets held by retirement funds, mostly government bonds. The funds, which are privately managed within Poland’s mandatory pension system, were banned from investing in government debt and forced to keep at least 75 percent of their assets in stocks. Poles also had to declare whether they still wanted to save for their retirement in privately managed funds or save for their future pensions in the state-run system.

 

Photo by  Paul Becker via Flickr CC License

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