Government passes pension reforms

The government’s narrow passing of proposed pension reforms on Wednesday represents something of a relief for the fractious coalition. Yet the legislation, which creates a mechanism for gradually raising the retirement age to 65 by 2030 and which was supposed to pass with support across the political field, was ultimately opposed by most of the opposition. Dominik Jun spoke with Tomáš Sedláček, chief strategist for ČSOB bank about the implications and what he believes is coming next.

“It is an absolutely necessary step that was foreseen for several years, if not decades. It can’t really be called a reform. It is a parametric change of the retirement age which was extremely low in the Czech Republic. So we still have to wait for a true reform that would actually change the system. This just pushes one of the parameters two yeas forward.”

And does the fact that this law was passed, does that reflect well with regards to the strength of the coalition, because it has been quite fractured lately and there were questions about whether it would be able to pass legislation at all.

“It is actually quite funny because this is an agreement that had already been made about two or three years ago with all the parliamentary parties, excluding the communists, of course. There was a parliamentary committee called The Committee on Pension Reforms. And one of the outcomes was the absolute imperative of increasing the retirement age. And this is something that all the parties agreed on, so this is an absolute minimum and if this were something that coalition had any quarrels over, it would truly be a completely dysfunctional government.”

Yet the opposition parties didn’t seem to support this legislation.

”Well, the only objection that they had was that they would have early retirement schemes for hard-working manual labourers. But other than that, the main philosophy – even the main opposition admits that it would have to increase the retirement age.”

And the further proposed government reforms – are they on track or are they looking to be watered down?

“There are about five possible options with regards to pension reform. This is something that all the parliamentary parties submitted about three years ago and the special committee that I mentioned calculated the costs of the proposals. One of the best things that came out of this was a system called ‘opt out’ which leaves up to the individual to choose whether he or she wants to remain in the current system or whether they want to switch to a more privately funded and more savings-oriented system.

Photo: CTK

This is a system that really shouldn’t be an insult to any parliamentary party and should be workable. Now, that is looking at it from the economic point of view. Of course, politically, one never knows. There is all this talk of the “zero tolerance” opposition politics etc. But economically, it obviously is a system that should be suitable for all the major political players.”

And when we look wider afield - we had these strikes the other day, so how is it looking for the rest of the government’s reform package related to health, taxes and so on?

“To put it somewhat lightly, the government is playing a game that it is reforming, and the opposition or the trade unions are playing the game that they are striking against it. Neither the strikes, nor the reforms are really serious. The government got what it wanted: for very weak reforms, it got a very weak strike. It was really a symbolic strike that didn’t change anything, and one wonders what the real ambitions were of the strikes. But some of the steps that the government is proposing, most of them are very, very mild and even the government itself isn’t satisfied with it. So, with so much turmoil around, I’m quite sure that most of the governmental politicians would agree that this is really the beginning and a first step and much more needs to be done.”