A EUR 10 bln dispute: Private pensions spark new political debate in Romania

The Government and ruling coalition have no intention of abolishing the mandatory private pension fund system, also known as Pillar II, Social Democratic Party (PSD) leader Liviu Dragnea and prime minister Viorica Dancila said on Monday, according to Mediafax. The information that the Government planned to suspend contributions to private pension funds in the second half of this year appeared in an official document by mistake, according to Ion Ghizdeanu, president of the National Strategy and Prognosis Commission (CNSP). The Government’s legislative agenda for the rest of this year, which was published on Sunday on the Government’s website, mentioned a possible law draft to suspend contributions to mandatory private pension funds from July 1 until December 31 and then come up with a new contribution system that would be paid by both the employees and employers from the income or profit tax. According to Ghizdeanu, this was only an internal work scenario that should have never appeared in an official document. The information triggered harsh reactions from the opposition, which accused the Government and ruling coalition of aiming to abolish the private pension funds. Liberal leader Ludovic Orban said his party would initiate a no-confidence motion against the Government and liberal MP Florin Catu said he would file criminal complaints against the prime minister and other ministers if such an initiative were promoted. Even former PSD prime minister Victor Ponta spoke against such a measure. Business organisations signed a letter asking the ruling coalition not to change the architecture of the local pension system as this would have negative social and economic consequences. PSD leader Liviu Dragnea firmly denied any intention of disbanding the mandatory private pension funds and asked the media and other parties not to “roll out false information”. However, he said the Government would carry out a thorough analysis of the financial data and present the Romanians exact data on the pension level they would get from the state (Pillar I) and from private pension funds (Pillar II) so that citizens can choose if they want to contribute to one or the other or to both of them. The discussion about the PSD’s alleged intention to nationalise private pension funds started last year when the biggest private fund manager in Romania, which is part of Dutch group NN sent a notice to its contributors saying this scenario was possible. The PSD leader denied any such initiative and asked the financial regulator ASF to apply harsh sanctions against the group.