* Polish finmin: proposal is disincentive for pension reform
* Proposal to let Poland write-off 1 pct/GDP from deficit
(Updates with quotes, background)
By Marcin Grajewski
BRUSSELS, Sept 30 (Reuters) - Polish Finance Minister Jacek
Rostowski on Thursday criticised a proposal by the European
Commission to offer only limited leeway on budget deficits for
countries reforming their pension systems.
The European Union executive made the proposal on Wednesday
as part of a legislative package to sharpen fiscal discipline in
the bloc after the financial crisis. []
"The Commission's proposals are quite inadequate... It will
be a powerful disincentive (for reforming pension systems),"
Rostowski told Reuters in an interview before a meeting of EU
finance ministers.
The Commission proposed a five-year period during which a
country reforming its pension system can count on some leniency
if its budget deficit exceeds the EU's ceiling of 3 percent of
gross domestic product and/or its debt exceeds the cap of 60
percent of GDP. []
Poland and eight other EU countries had hoped to be allowed
to write off the full cost of pension reform from their deficit
and public debt, which could help them avoid EU disciplinary
action. []
Those countries, which include the Czech Republic, Hungary
and Sweden, have created private pension funds, to which the
state-supported, pay-as-you-go pension systems contribute
certain sums.
Their preference would be for the 27-country bloc to change
its accounting rules to allow those contributions to be written
off from the deficit or debt.
This, they say, would encourage reform in other countries
which is needed because of the ageing of societies but has
provoked protests in some cases. [] []
They also say that investments in pension funds do not have
the effect of fiscal loosening on the economy.
Germany has raised objections to the plan, and calls for the
strictest possible fiscal rules in the EU.
"The cost of the pension reform will be growing. And we will
be able to write off this cost only for five years and only a
small amount," said Rostowski after arriving for a meeting
European Union finance ministers in Brussels.
"Other countries, including those in western Europe, will
have to follow the path of pension reform because of their
demographic situation. And now we have a bad mechanism that will
function for years. []"
Rostowski said the Commission's proposal, which will now be
studied by EU governments and the European Parliament, would
allow Poland to have a budget deficit of 4 percent of GDP
without being subject to the EU's budget discipline procedure.
This procedure is normally triggered when a country's budget
deficit tops 3 percent of GDP. Under the Commission's plan it
would also be launched in some cases for the countries which
have public debt higher than 60 percent of GDP.
"The (Commission's) proposal gives us a relief of maximum 1
percent of GDP. But our pension reform now creates costs of
about 2.4 percent of GDP," Rostowski said.
One criterion of joining the euro zone is not being subject
to EU disciplinary action on the budget and Rostowski
acknowledged that, in theory, the proposal could make it easier
for countries such as Poland to adopt the euro.
"Perhaps it could. But it does not matter here. It is not
our argument," said Rostowski.
(Editing by Patrick Graham)
