HUNGARY - Hungary's pension funds have turned to the country's constitutional court in a bid to overturn legislation that will deprive them of contributions for 14 months.

The news comes as the country's economics minister announced the measure would remain in place "until economic growth starts".

Stabilitas, Hungary's pension fund association, is arguing a law to divert HUF30bn (€110m) in monthly pension contributions to the state treasury is unconstitutional, as it allows state interference in a private contract between schemes and its members.

Ilona Juhasz, the association's secretary general, also said the law was a violation of constitutionally protected property rights, since under Hungary's existing pension system, members are the owners of the pension funds of which they are members.

Many of the country's funds are loss-making, and may not survive an extended period without inflows.

The contribution freeze, announced three weeks ago, was accompanied by legislation allowing existing members of second-pillar compulsory pension funds - which have HUF750bn in assets - to opt back into the state pension pillar.

This would transfer savings to the government in exchange for an as-yet undefined promise of government recognition of the money received by the budget, as well as a larger state pension on retirement. 

Additionally, the government also announced windfall taxes on primarily foreign-owned energy, telecommunications and retail companies to accompany earlier crisis taxes on banks.

Stabilitas has urged members not to opt back into the state system before the constitutional court has reached its ruling.

Even if Stabilitas wins the case, however, the government could use its two-thirds parliamentary majority to change the constitution, as it promised to do when the court struck down another revenue-raising measure last month.

At a meeting with employees and employers organisations, Gyorgy Matolcsy, the country's economics minister, said: "We will need the crisis taxes, the redirection of pension fund contributions and other temporary measures until real economic growth starts."

Matolcsy added economic growth would reach 3% in 2015, a level not seen since the turn of the century, therefore regarded as unrealistic by most forecasters.

Prime minister Victor Orbán, argued three weeks ago that during a time of crisis, the government could not make payments to pension funds.

The country, which has suffered years of sluggish growth, earlier this summer failed to agree a renewal of its IMF support package, but nonetheless committed itself to achieving deficit targets of 3%  for this year and 3.8% for 2011.

The IMF has since warned that the changes to the pension system risk undermining confidence in it.

Speaking at a conference today, Orbán said the measures were needed to adjust to a new world dominated by China.

"We are sailing under a western flag, but eastern winds are blowing," he said. "Every measure we take that seems strange now is justified from the point of view of the future."

Although the government, elected in the spring, has delivered on election promises to cut corporate and income taxes sharply, critics argue its alternative sources for revenue risk slowing growth.

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