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In Europe, the cost of socialism is apparently reaching critical mass. According to the Christian Science Monitor, five countries–Hungary, Bulgaria, Poland, Ireland and France–are in various stages of confiscating or attempting to confiscate citizens’ pension savings as a means of offsetting government revenue shortfalls. Since most pensions plans in Europe are state-generated, such seizures are relatively easy to accomplish. Yet while two of the attempts are being made to get back savings invested in national funds, the other three are grabs for “private personal savings.”
On November 24, 2010, the Hungarian government approved a series of laws forcing their citizens to go back into a state-controlled pension plan. Hungary has a “three pillar” pension system: pillar one is a state-funded pay-as-you-go pillar; pillar two is a mandatory private pension deducted from gross wages and invested in the market; and pillar three is a private pension in which workers can invest some of their net income for additional future savings.
The government has scrapped pillar number two and offered Hungarians a stark choice: either remit their private pensions savings to the state, or lose the right to collect a pillar one state pension–even as the obligation to continue contributing to it would remain.
Such a confiscation would raise $14 billion, which represents the savings of nearly three million pensioners over the course of 13 years. It is an amount of money equivalent to 10% of Hungary’s GDP, and government insists the seizure is necessary to satisfy the demands engendered by the European Union and International Monetary Fund assistance it has already received, which included a strict budget deficit target of 3% of GDP in 2011. Hungarians have until January 31, 2011 to decide whether they will remit their pillar two funds to the government. Only those who wish to remain in private funds must express that desire. Those who don’t will have their pensions automatically transferred.
In Bulgaria, similar attempt was made for similar reasons: to shore up government finances. The original plan there, first drafted in October of last year, was one in which nine private funds worth approximately $300 million would be transferred to government coffers, despite a warning from the International Monetary Fund (IMF) that such a transfer would “not close the gap in the social security system.” The private pension funds themselves agreed with the IMF, despite the government’s insistence that the confiscation would “help provide higher and more just pensions for those persons who have the right of early retirement.“ “We feel confident because after the information that we provided to the government today, there is no way for the government to take a decision based on misleading data,” said Daniela Petkova, head of the Doverie retirement funds.
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