On Thursday, they debated with President Petr Pavel about the pension reform, which was presented by Fial’s government and which does not even have partial support among the opposition. The transformation of the pension system has been a topic in the Czech Republic for more than 35 years and so far without results. Why? “The political spectrum must agree on the pension reform, at least with a majority. Otherwise, it is not feasible,” says economist Jana Matesová in the program Money Talk.
Money talks
Prague
10:34 am April 1, 2024
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The transformation of the pension system has been a topic in the Czech Republic for more than 35 years and so far without results (illustrative photo) | Photo: René Volfík | Source: iROZHLAS.cz
According to economist Matesová, the pension reform is being held back by the opposition parties, which lead a policy of zero tolerance. “The political spectrum must agree on the pension reform, at least with a majority. Otherwise, it is not feasible,” he states.
What is preventing the pension reform? Economist Jana Matesová answers in the Money Money program
The transformation of the system is complex and includes three pillars: working people financing pensions, mandatory pension savings that cannot be withdrawn, and additional voluntary savings. At the moment, however, the Czech Republic is running on a continuous system. And it is precisely the remaining two pillars that are being awaited.
Pensions on debt
The construction of the second pillar would mean that working people would stop paying pension money directly to the state and start saving it in individual accounts. The state would have to cover this shortfall.
According to the economist, this is possible, but it would have to take place at a time when a strong generation enters the labor market and a weak one retires. “You need a lot of people who work, pay for pensions, and against them relatively few pensioners,” explains Matesová.
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But the state loan would be extremely large at this moment. “In order to be able to borrow it at all, we have to be in a good budget situation and the financial markets have to trust the budget,” the economist mentions.
According to the economist, we were in the ideal constellation of elements for pension reform in the zero years of the current century. But then the rebuilding of the system was stopped by the opposition’s unequivocal disapproval, and the chance was thus wasted.
The current demographic development does not offer such a good opportunity. And not even when the generation of descendants of Husák’s children enters the workforce after 2030. Forcible introduction is therefore, according to the economist, unrealistic at the moment.
“I am afraid that we are not able to finance it in a reasonable way. The government still plans to supplement the reforms of the third pillar, which are necessary. I think it is the maximum possible,” concludes Jana Matesová.
Listen to the entire interview in the audio recording. Hosted by Václav Pešička.
Václav Pešička, fos
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