While Polish officials engaged in rhetorical games and semantics to conceal the severity of the “transfer” of privately owned assets to a “state pension vehicle” known as ZUS, the controversial move is still fueling confusion and fierce criticism from analysts and economists. Some experts fear other governments may follow suit.
The private pension funds, many managed by prominent foreign firms, declared the scheme unconstitutional because private property was being seized without compensation. Some even suggested the private pension system may shut down entirely. While authorities have not yet confiscated equities from the private pensions — to which Polish workers have been obligated to contribute — officials defended the bond confiscations by arguing that they helped avoid even more radical options, such as seizing everything outright, including company stocks held by the funds.
Prime Minister Donald Tusk announced that future enrollees in the mandatory pension scheme would no longer be required to pay into the private element, known as OFE, of the hybrid government-private system. Analysts said that could result in even fewer resources held in the private funds, which currently hold assets worth about 20 percent of GDP and represent the largest investors in the Polish stock market.
Tusk, however, tried to paint the confiscation as a positive development. “The system has turned out to be built in part on rising public debt and turned out to be a very costly system," he said at a press conference, drawing swift criticism. “We believe that, apart from the positive consequence of this decision for public debt, pensions will also be safer.” Of course, seizing private wealth may reduce government debt for the time being, but it was not clear how “safety” was being improved.
Critics lambasted Tusk’s statement from all angles, pointing out that confiscating private assets does not make them any safer and that, in essence, the government simply had too much outstanding debt to be able to issue even more debt. Some analysts also suggested the move was actually a half-baked ploy to build political support with voters by increasing its ability to borrow and spend more money on government programs.
Click here to read the entire article.