“Save for retirement and build nuclear units.” The government wants to reach into pension funds

The government of Petr Fiala (ODS) is solving how to finance extremely expensive projects at a time of hundred billion budget deficits. For example, it could tap into funds that people save for retirement. There is currently a debate about what laws should be changed for this. One of the areas for which these funds could be used is the financing of the construction of nuclear blocks, for which one or almost two trillion crowns will be needed. This possibility is also supported by the opposition movement ANO.

Minister of Transport Martin Kupka (ODS) told Echo24 that the government has been dealing with the idea of ​​using free funds for a long time. “It is not just the core, but the financing of other areas, of course with interest guaranteed by the state, that is the key condition. We are now actively dealing with it, including which legislation or which laws would have to be changed. We are putting together what kind of tools it could be. One of them, in addition to finances from pension funds, could be free money from insurance companies,” said Kupka.

Vice-chairman of the STAN movement Lukáš Vlček said that he personally supports this initiative. “One of the ailments of the Czech economy is, let’s say, the low dynamics of the capital market. The Czech economy uses this potential significantly less than in neighboring countries. In my opinion, the considerable resources that citizens have stored in pension funds, for example, could be invested much more effectively in projects with a state guarantee, such as the construction of new nuclear sources or investments in transport infrastructure,” Vlček told Echo24.

“For small investors who manage their retirement savings in this way, these are low-risk investments, and at the same time, capital resources in the economy, which are currently not working optimally, can help finance significant investments of national importance,” added Vlček.

The people also agree with the ambition. “I personally believe that especially the finances voluntarily saved in the third pillar of the pension system should also be invested in infrastructure and other strategic state projects. And that with a reasonable market return and especially with a minimal level of risk. And there is no reason why these projects should not also include the construction of nuclear power plant blocks,” KDU-ČSL economic expert Michael Kohajda told Echo24.

Havlíček: Billions for future seniors instead of banks

The proposal was also supported on Sunday by former Minister of Industry and Trade Karel Havlíček (ANO). At the same time, he is beating the government for not yet presenting and, according to him, will not present a pension reform. “He is preparing a whole series of parametric changes, but he is not presenting the most important thing, i.e. pension pillars. However, it is not possible without it. Just cutting is not enough. Economically active people who start saving must be motivated,” Havlíček told Echo24.

“That’s why we are proposing a state-guaranteed pillar that would be used for investments in, for example, the core or transport infrastructure. The state will have to borrow on the public market and the question is why it should pay hundreds of billions in interest to banks when it can use the money for future seniors. It is called the Scandinavian model. Among other things, they are already doing the same in Germany. People would be sure that they would not lose money, reasonable interest, they would be part of building the infrastructure, and the state would receive partial resources for construction,” added Havlíček.

According to the latest information, the price of the construction of four nuclear units should be one trillion crowns in 2020 prices, or after conversion according to the consumer price index, the final amount is about 1.75 trillion crowns. The timetable has not yet been given, the closest is the project to complete the construction of one block of the nuclear power plant in Dukovany.

Pension funds are not a piggy bank

The chief economist of Creditas bank Petr Dufek told Echo24 that at the end of last year, the participants had deposited less than 600 billion crowns in the pension funds. “This is not a staggering amount of money that could solve the problem of ensuring the standard of living of future pensioners, and indeed not a sufficient package to fund government investment, as is sometimes suggested. And that’s mainly because it’s not a pile of money that you can just reach into like a cash box,” said Dufek.

“Most of this money has long been invested in various forms of bonds and shares, so there is only about 80 billion of free money, for example in current and term accounts, a large part of which is the necessary liquidity for the functioning of the entire system,” added the economist

If these funds should primarily finance some public investments, they must have sufficient (profit) motivation to do so, according to Dufka. “At the same time, if they do so, they will not buy, for example, government bonds, which are used to finance the government debt or the ongoing deficit management of the budget, so someone else will have to buy them. The idea that it is an ‘undiscovered’ dormant bundle of money that can be easily reached is, from my point of view, a very big simplification. Whether they are talking about the construction of highways or the construction of power plants,” the economist explained.