Pension reform in Hungary? The disappearance of stolen goods
There are times when Hungarian journalists are not on the ball. I especially remember two such occasions. One was the so-called Tocsik-affair, an illegal party financing scheme way back in 1997-98, that contributed greatly to the electoral victory of Fidesz. The story was discovered by a lesser known Hungarian paper but it became “news” only about two months later. Until then no one seemed to have even noticed it.
A similar oversight occurred in connection with Viktor Orbán’s notorious 2008 speech in Kötcse. It was a very important speech because in it Orbán clearly stated that he was thinking of establishing what would amount to a one-party system where the opposition is so weak that it is powerless. At the time I found only one sentence about this fateful announcement, which no one seemed to have noticed. People read it and didn’t comprehend its import until almost two years later when the speech was published in its entirety in a short-lived right-wing literary magazine. Then the panic hit, but by then it was far too late.
And here is another, perhaps less momentous example. On July 16, after many delays, the government passed amendments to the law on the system of pensions. Only one Hungarian publication, Világgazdaság, bothered to inquire from the Ministry of Human Resources about the details. Two weeks later the answer came: “The essence of the amendments to the law on pensions is that the existing system will not change.” So, the reforms that had been promised and deemed necessary because of the dreadful state of financing the current system are not going to be implemented. Why not? Allegedly, because the government discovered that with the changes in the law regarding early retirement and eligibility requirements for “disability retirement” (rokkantnyugdíj) the fund is in good shape. Even with the ever worsening demographic situation.
Here I’m going to concentrate on only one aspect of the government’s decision to leave the current system untouched. But I think it speaks volumes about this government’s untrustworthiness.
At the end of November when György Matolcsy, minister of national economy, announced the “nationalization” of savings that over three million people had invested in private pension funds, he promised that the savings would simply be transferred to the state-run pension system. Each employee would retain the hitherto saved amount in an individual account. Moreover, in the event of the pensioner’s death, that money could be inherited.
Soon enough, Viktor Orbán named Gabriella Selmeczi commissioner in defense of pensions. She elaborated on the scheme. Any employee at any time will be able to ascertain the exact amount he has in his account and will be able to estimate the size of his pension at the time of retirement.
In February 2011 Viktor Orbán joined these two and promised that this new system of individual accounts will be ready to be implemented by the end of 2011. All these promises were necessary to entice more and more people to switch their accounts from private funds to the common state-run system.
These promises were most likely brazen lies. I suspect that the government never had any intention of introducing a new system of individual accounts because the nationalized private pension funds never made it into the system. A part of that enormous amount of money (three trillion forints) was spent on current expenses while another part was lost in the stock market. So there was nothing to add to the individual accounts.
Naturally, the end of 2011 came and went and there was no new law. In January 2012 Gabriella Selmeczi admitted that “there is still a debate concerning different concepts but by the middle of the year a decision will be made.” Even in April, when the second Kálmán Széll Plan was released, the government promised “the introduction of individual accounts in the pension plan.”
Oh, yes, the Kálmán Széll Plan 2.00, as it is called in the Hungarian media. This document was supposed to prove to the European Commission that the Orbán government is planning to put its financial house in order. On the basis of its promises Ecofin, the council of EU finance ministers, approved the continuation of EU subsidies to Hungary, the so-called cohesion funds. But what if within months one of its pledges is already violated? What will the EU think of an unreformed system of pensions that in the near future might be unmanageable financially? Because even the Hungarian government is aware of the seriousness of the situation as the Kálmán Széll Plan 2.00 states: “The aging of the population is accompanied by increased expenses and if no appropriate measures are taken it influences the growth of the sovereign debt in the long run.” It seems that Orbán is ready to worry about all this later because at the moment the nationalized savings of three million people are gone and there are no other funds to put into these people’s nonexistent accounts.
Meanwhile, Gabriella Selmeczi, who was supposed “to defend” the people’s pensions, no longer occupies the post of commissioner. In fact, the post no longer exists. She was appointed to oversee the transfer of stolen money into the bottomless pit of the Hungarian government’s budget. The money is gone and so is any kind of compensation for those who were robbed.