CZECH REPUBLIC - The Czech government approved general principles of pension reforms this week.

"So far, the government agreed that the new pension system should be more effective and just, as well as financially sustainable," prime minister Vladimir Spidla said after a government meeting on Wednesday.

Originally, the government was to discuss details of the pension reform proposed at the end of 2003, but it postponed the debate due to lack of political consensus among Parliamentary coalition parties.

The government asked Spidla and labour minister Zdenek Skromach to lead further talks with other parliamentary parties. Spidla and Skromach, both from the senior coalition Social Democrats Party (CSSD), are expected to meet first with reps of the junior coalition parties, the Christian Democrats and the Freedom Union-DEU to find ammunition for talks with the opposition.

The heads of the coalition and opposition parties - the Civic Democrats (ODS) and the Communists (KSCM) - met to discuss the pension reform for the first time last month, but failed to find a generally acceptable model.

The government coalition parties want to introduce a so-called Notional Defined Contribution (NDC) system. The NDC model calls for the creation of individual virtual national accounts that will allow all employees to see how much they have contributed to their pensions, and how high their pensions will be.

The right-wing ODS objects, saying that virtual accounts will only conserve the current situation and calls for much deeper changes. The retirement age must be further increased in the future and conditions for early pensions must be made stricter, according to ODS. KSCM would like to see a system that stresses solidarity to a greater extent.

The government could push its version through Parliament as its ruling coalition enjoys the slim majority of 101 seats in the 200-member lower house. However, it says that political and social agreement is needed for a change that will impact several generations. The current government's mandate expires in mid-2006.

The government plans to submit the main principles of the reform to Parliament by mid-2004, while more specific bills should be submitted a year later. The Czech Republic made the first step to reform its pension system in September 2003 when Parliament increased retirement age by two years to 63.

According to the government proposal, changes in the pension system would only concern people born in 1967 and later. Older Czechs would still fully enjoy all the benefits of the current "pay-as-you-go" pension system.