The Maastricht three-percent annual deficit rules from 1992 and the Polish debt restriction to 60 percent of GDP were devised when the realities of debt were different, Marek Dietl, the Warsaw Stock Exchange (WSE) chairman tells daily.
“If we can even out social inequality, raise the quality of our human capital, investing in education, research and health and improve the infrastructure (...) maybe it is worth moving away from the restrictions which were brought about by a transition in the economy,” Marek Dietl tells Dziennik Gazeta Prawna daily.
The interview, which took place in the heat of pre-election discussions about raising social spending, and covering public sector worker pay demands. In addition, Mr Dietl’s voiced his opinions before the announcement by the Prime Minister Mateusz Morawiecki of plans of what was to happen to the funds remaining from a massive tranche of pension funds worth PLN 162 bn currently invested in stocks and shares on the WSE.
Pension fund reform
According to Mr Morawiecki, the pension customers can choose to have the funds transferred to the social security pension scheme system or hold them in pension-savings accounts, known as IKE, held in commercial banks, which can take five forms-either interest-bearing deposits or investment fund-backed savings accounts. The 162 bn tranche was what was left over from of the second pillar of the country’s of the three-tier pension scheme, set up in 1999, which is being dismantled in stages to make room for a new system.
In 2014 a tranche of the second pillar of the old scheme, which consisted of portfolios of government bonds, was merged with the first pillar, administered by the Social Security Office (ZUS). The government of the time therefore was able to recoup the bonds, reducing the country’s public debt. After massive and low growth following the 2009 financial crisis, the measure prevented the government from going above its 60 percent debt vs GDP ratio, which is currently a constitutional no-no.
However right or wrong the previous government was in dismantling the former system from the fiscal point of view, their move led many in financial circles to talk of a betrayal of trust.
When asked if the idea to distribute the funds to the IKE accounts was a good one, Mr Dietl said that “any scenario which is based on the privatisation on most of those funds is acceptable to the capital market.” As for the timing for the reform, he said that it was “best to do so before the end of the year to gain credibility and show that we can take difficult decisions.”
The new generation of pension funds will start collecting contributions in the autumn and it the intention of the new scheme to use the money to provide funding for middle cap companies on the WSE.