EU could take blame for pension reform – study

EUROPE – A new academic study argues that European Union member states may be willing to let the EU take the blame for harsh decisions on pension reform.

The report coincides with the European Parliament calling for European leaders to take more of a lead on economic reform.

The new study, by Vincenzo Galasso and Paola Profeta, said: “National governments may be willing to delegate pension policies to the European Commission in order to shift the political cost of a reform decision onto the European institutions.”

“In this case, local governments, acting to meet EU criteria on pensions’ financial sustainability, could blame the EU for any unpopular reform, and thus bear a lower political cost among the losers from the reform.”

The comments come in a 63-page report called “Lessons for an Aging Society: the Political Sustainability of Social Security Systems”. Galasso is an associate professor of economics at the Università L.Bocconi and Profeta is an assistant professor of public economics at the Università di Pavia.

They said the lack of political accountability in the EU might give the Commission “enough room to impose some common criteria to reform the EU pension systems, along the suggestions contained in the EC reports on adequate and sustainable pensions”.

National governments would be then called upon to implement these reforms “through specific measures in accordance with the current status of their pension system”.

“On these intergenerational issues, the Commission would thus end up giving voice – and political weight – to those young or yet to be born individuals who today do not vote, but who tomorrow will be asked to foot the bill.”

The study said that, aside from the issue of pension portability, there is little role for EU coordination on pensions as European social security systems differ in crucial ways.

“The recent European economy history suggests that this delegation of decisions to the EU has proven successful in many instances, such as inflation and exchange rate policy, in order to ‘tie the (national) government hands’.”

Meanwhile, Christa Randzio-Plath, chair of the European Parliament’s Committee on Economic and Monetary Affairs, said EU leaders are not doing enough on the eve of the EU Spring economic summit on March 26-27 in Brussels.

She said: “Europe is not fully using its economic and human potential and I therefore urge the EU's heads of state and government to assume their responsibilities and not only give a signal to boost confidence in these difficult times but also to clearly point the way forward.”