Articles Originally Presented at the EISS Conference on ‘EU Enlargement and Social Security’: Pension Reform in the East European Accession Countries
| DOI | 10.1177/138826270300500102 |
| Date | 01 March 2003 |
| Author | Katharina Müller |
| Published date | 01 March 2003 |
| Subject Matter | Article |
PENSION REFORM IN THE EAST EUROPEAN
ACCESSION COUNTRIES
Katharina Mu
¨ller*
Abstract
This paper focuses on the recent pension reform choices in the East European
accession countries, which have seen many developments in this highly sensitive
policy area. The paper does not discuss the desirability of alternative pension reform
paths but, instead, seeks to explain how different pension reform choices came to be
made in five EU accession countries. Three of the countries – Hungary, Poland and
Bulgaria – represent countries which have adopted partial pension privatisation,
while the other two countries – the Czech Republic and Slovenia – have reformed
existing PAYG schemes without resorting to privatisation. The behaviour of
individual and collective actors in the pension reform arena in each of these
countries and the economic, political and institutional constraints on them are
analysed in an attempt to explain why some countries have opted for radical reforms
while other have not.
1. INTRODUCTION
Since the late 1980s, the countries of Eastern Europe witnessed not only a
fundamental transformation of their societies and economies, but also of
their retirement schemes. Pension reform seemed inevitable, as the process
of economic transformation placed great strains on existing pension
systems. However, there was considerable disagreement over which type of
pension scheme to adopt. In many transition countries, local debates
reflected international controversy, triggered by forecasts of population
ageing and a wave of pension privatisations
1
in Latin America. This debate
centred mainly on the question of whether the existing public pay-as-you-go
(PAYG) systems should be retained, or whether private, individually fully
ARTICLES ORIGINALLY PRESENTED AT THE EISS CONF ERENCE ON
‘EU ENLARGEMENT AND SOCIAL SECURIT Y’
European Journal of Social Security, Volume 5 (2003), No. 1 7
* Dr. Katharina Mu
¨ller, German Development Institute (DIE), Tulpenfeld 4, D-53113 Bonn,
Germany. e-mail: katharina.mueller@die-gdi.de
1
The notion of pension ‘privatisation’ has been criticised, since the state continues to play a
role in the new schemes. Here, the term is used to indicate the scope and direction of the
recent wave of reforms. For a more detailed discussion of the public-private interaction in the
new schemes, see MU
¨LLER (2002c).
8Intersentia
funded (IFF) pension schemes, such as the one in Chile
2
, were a more
appropriate solution to short- and long-term problems facing old-age
security.
This paper focuses on the recent pension reform choices in the East
European accession countries, which have seen many developments in this
highly sensitive policy area. In terms of models chosen, these countries fall
into three groups: (1) in Bulgaria, Estonia, Hungary, Latvia and Poland,
legislation introducing partial pension privatisation was enacted and
implemented; (2) in Lithuania, Romania and Slovakia, there are detailed
plans to move towards partial pension privatisation, but policymakers face
considerable obstacles; (3) in the Czech Republic and Slovenia, policy-
makers decided to reform the existing public PAYG scheme from within,
without resorting to pension privatisation. It seems that pension privatisa-
tion is the predominant policy choice in the accession countries. However,
building a political consensus for this controversial choice can prove
difficult, if not impossible. Thus, pension privatisation has sometimes been
rejected.
Unlike most pensions-related research, this paper does not discuss the
desirability of alternative pension reform paths.
3
Instead, it seeks to explain
how different pension reform choices came to be made in selected EU
accession countries. Hungary, Poland and Bulgaria represent the move
towards pension privatisation, while the Czech Republic and Slovenia stand
for a less radical paradigm choice. The behaviour of individual and
collective actors in the pension reform arena is analysed, taking account of
economic, political and institutional constraints. The analysis contributes to
a multi-disciplinary strand of research that has developed over the past few
years.
4
Katharina Mu
¨ller
2
In 1981, under the Pinochet dictatorship, Chile was the first country in the world to switch
from a public PAYG system to a multi-pillar scheme based on private, IFF pension funds.
3
For an evaluation of the recent pension reforms in Eastern Europe, see MU
¨LLER (2001b,
2002b).
4
Recent studies on the political economy of pension reform in Latin America include HUBER
and STEPHENS (2000), KAY (1998, 1999), MADRID (1999, 2002), MESA-LAGO (1999) and MESA-
LAGO and MU
¨LLER (2002). The development of pension reform in post-socialist countries has
been analysed by CASHU (2000a, b), MU
¨LLER (1999), NELSON (2001) and ORENSTEIN (2000).
BROOKS (1998, 2001), JAMES and BROOKS (2001), MADRID (1998, 2001), MU
¨LLER (2001c,
2002d), and ORENSTEIN (2001) seek to provide a cross-regional explanatory framework.
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