Tag Archives: Hungary

Baby Hitches a Ride

This baby turtle getting a free lift on his mommy’s head is only 4 days old, 2.17 inches long, and weighs less than an ounce — only 0.88 oz!

He’s an African spurred tortoise, Geochelone sulcata, one of 8 babies born to the same mommy turtle at the Nyiregyhaza Animal Park in Hungary.

The 8 babies had hatched after 115 days.

[Source: UK's Daily Mail]

~Eowyn

5 European Governments Seize Private Pensions

WARNING! ALARM!

The governments of five European countries — Hungary, Poland, Bulgaria, Ireland and France – have taken over their citizens’ private pension money to make up deficits and budget shortfalls. Given the American Left’s oft-stated admiration for Europeans, who are further down the ruinous road of socialism than the United States, this should sound the alarm for all Americans who want to hang onto our private pensions and savings.

See also Fellowship of the Minds’ posts on this:

~Eowyn

European nations begin seizing private pensions

By Jan Iwanik / Christian Science Monitor / January 2, 2011

[This article originally was written in Polish and posted on Instytut Misesa (The Adam Smith Institute Blog). It was translated into English by the Christian Science Monitor.]

People’s retirement savings are a convenient source of revenue for governments that don’t want to reduce spending or make privatizations. As most pension schemes in Europe are organised by the state, European ministers of finance have a facilitated access to the savings accumulated there, and it is only logical that they try to get a hold of this money for their own ends. In recent weeks I have noted five such attempts: Three situations concern private personal savings; two others refer to national funds.

The most striking example is Hungary, where last month the government made the citizens an offer they could not refuse. They could either remit their individual retirement savings to the state, or lose the right to the basic state pension (but still have an obligation to pay contributions for it). In this extortionate way, the government wants to gain control over $14bn of individual retirement savings.

The Bulgarian government has come up with a similar idea. $300m of private early retirement savings was supposed to be transferred to the state pension scheme. The government gave way after trade unions protested and finally only about 20% of the original plans were implemented.

A slightly less drastic situation is developing in Poland. The government wants to transfer of 1/3 of future contributions from individual retirement accounts to the state-run social security system. Since this system does not back its liabilities with stocks or even bonds, the money taken away from the savers will go directly to the state treasury and savers will lose about $2.3bn a year. The Polish government is more generous than the Hungarian one, but only because it wants to seize just 1/3 of the future savings and also allows the citizens to keep the money accumulated so far.

The fourth example is Ireland. In 2001, the National Pension Reserve Fund was brought into existence for the purpose of supporting pensions of the Irish people in the years 2025-2050. The scheme was also supposed to provide for the pensions of some public sector employees (mainly university staff). However, in March 2009, the Irish government earmarked €4bn from this fund for rescuing banks. In November 2010, the remaining savings of €2.5bn was seized to support the bailout of the rest of the country.

The final example is France. In November, the French parliament decided to earmark €33bn from the national reserve pension fund FRR to reduce the short-term pension scheme deficit. In this way, the retirement savings intended for the years 2020-2040 will be used earlier, that is in the years 2011-2024, and the government will spend the saved up resources on other purposes.

It looks like although the governments are able to enforce general participation in pension schemes, they do not seem to be the best guardians of the money accumulated there.

The table below is a summary of the discussed fiscal-retirement situations (source):

*These figures do not include the costs of higher taxes, price inflation and low interest rates, which additionally devaluate retirement savings.

Governments of Ireland and France Seize Private Pensions

Following Argentina and Hungary, the governments of Ireland and France have also seized private pension funds as a partial fix for their debt problem.

George Coats of Financial News reports on November 29, 2010, that last week:

  • Ireland announced it would use the country’s €24 billion National Pensions Reserve Fund “to support the exchequer’s funding programme.” 
  • The French parliament, via a change made to the social security law, seized the €36 billion French reserve pension fund, the Fonds de Réserve pour les Retraites (FRR), to pay off the debts of France’s welfare system.

Coats explains what happened in France:

The assets [of FRR] have been transferred into the state’s social debt sinking fund Cades. The FRR will continue to control the assets, but as a third-party manager on behalf of Cades….

The transfer of the FRR’s assets to Cades is controversial. Force Ouvrière, a trade union confederation, accused the government of “provoking the clinical death” of the FRR.

The [French parliament's] decision was taken within the context of this year’s pension reform, which provoked riots with its decision to raise the retirement age. The state old-age pension system, the Cnav, is in deficit, and responsibility for financing the deficit rests with Cades.

The government is requiring the FRR to pay €2.1bn a year to Cades to meet this obligation.The government claims that the rise in retirement age will return Cnav to balance by 2018, so the FRR is expected to pay this sum for the next eight years. The FRR will then be wound down. It is expected to cease operations by 2024.

Coats concludes that “The move [by Ireland and France] reflects a willingness by governments to use long-term assets to fill short-term deficits.”

The U.S. national debt is now nearly $14 trillion. Don’t think that what happened in France, Ireland, Hungary, and Argentina can’t happen here.

~Eowyn

Government Seizes Private Pension Funds

UPDATE: See also Governments of Ireland and France Seize Private Pensions.”

No, it is not the U.S. government that just seized private pension funds. It’s the government of Hungary.

But given last January’s Obama trial balloon about seizing our 401k and IRA retirement accounts by forcing us to convert them into annuities (see HERE and HERE), this news from Hungary is alarming because it’s a precedent.

Never forget what Thomas Jefferson warned in his letter to Edward Carrington, 1787:

“If once they [the people] become inattentive to the public affairs, you and I, and Congress, and Assemblies, Judges, and Governors, shall all become wolves.”

~Eowyn

Hungary Follows Argentina in Pension-Fund Ultimatum, `Nightmare’ for Some

By Zoltan Simon – Bloomberg – Nov 25, 2010

Hungary is giving its citizens an ultimatum: move your private-pension fund assets to the state or lose your state pension.

Economy Minister Gyorgy Matolcsy announced the policy yesterday, escalating a government drive to bring 3 trillion forint ($14.6 billion) of privately managed pension assets under state control to reduce the budget deficit and public debt. Workers who opt against returning to the state system stand to lose 70 percent of their pension claim.

This is effectively a nationalization of private pension funds,” David Nemeth, an economist at ING Groep NV in Budapest, said in a phone interview. “It’s the nightmare scenario.”

Hungary is rolling back pension changes implemented more than a decade ago as countries from Poland to Lithuania find themselves squeezed by policies designed to limit long-term liabilities by shifting workers into private funds. Now the cost is swelling debt and deficit levels at a time when the European Union is demanding greater fiscal discipline.

Hungary, the most indebted eastern member of the EU, is following the example of Argentina, which in 2001 confiscated about $3.2 billion of pension savings before the country stopped servicing its debt. The government in Buenos Aires nationalized the $24 billion industry two years ago to compensate for falling tax revenue after a 2005 debt restructuring.

Hungary…Prime Minister Viktor Orban plans to use pension funds to pay current government pensions and reduce debt as he seeks to cut the budget deficit to less than the EU limit of 3 percent of gross domestic product next year from a targeted 3.8 percent this year. The bloc last month rebuffed a request from nine members, including Hungary, Poland and Sweden, to discount deficit figures by the amount shifted to private managers. “There is a huge hole in the state pension system fund,” Matolcsy told reporters in Parliament. “The government fund’s revenue from pension contributions is 900 billion forint less than its expenditure. This is unsustainable.”

In 1998, Hungary required workers to put a portion of their pension contributions into privately managed funds that were designed to supplement state pensions. Today, about 3 million people have money in the private plans.

The funds’ assets will be automatically shifted to the state system on Jan. 31, unless members specifically opt out. Those who decide to remain in the private funds will lose their government pension after future contributions even as the state will continue to claim 70 percent of pension contributions paid after the individual, Matolcsy said.

“This is open blackmail,” Julianna Baba, president of the Stabilitas Penztarszovetseg, which groups private pension funds, said in a phone interview today. “It’s a rigged deal.” The association is filing a motion at the Constitutional Court to have the law annulled. It says the pension fund plan violates constitutional guarantees against discrimination, for the rule of law, social security, the defense of property and human dignity.

Other eastern EU members are also seeking to cut deficits with the help of pension funds. Polish Prime Minister Donald Tusk said yesterday that the country may issue long-term pension bonds to compensate private funds for funneling some employee contributions to the budget…. Lithuania reduced contributions to private funds last year, and Estonia announced in April 2009 that it would freeze pension-fund contributions through the end of this year. The government in Tallinn is reinstating partial contributions to pension funds from January. In Bulgaria, private vocational pension funds will put 20 percent of their assets under state control to cover early retirement until 2014 to curb a widening deficit. This amounts to 100 million lev, or $68 million. Such retirement funds cover about 100,000 workers in specific professions who are forced to retire early.

…“The pension system changes will increase long-term risks, while short-term gains such as lower public debt and deficit will prove illusory, if the economy stays weak,” Michal Dybula, an economist at BNP Paribas in Warsaw said in an e-mailed note. “The proposed changes on pensions also increase the risk of rating downgrades, since Hungary’s structural fiscal position will not improve.”

In Hungary, employers set aside 24 percent of each worker’s salary for pension contributions and employees are required to pay 10 percent. Forcing workers back into the state system means the government will retain control of all that money, rather than transferring a portion to the private funds.

Under the rules announced yesterday, workers who choose to remain in the private pension funds will lose the social security contributions made by their employers, Matolcsy said. The government would continue to transfer contributions made by employees to the funds, he said.

“It’s unprecedented in Europe that a government is threatening to kick its own citizens out of the state pension system,” Zoltan Torok, a Budapest-based economist at Raiffeisen Bank International AG, said in a phone interview. “It’s probably enough to ensure that no one is going to stay in the private pension fund system in his or her right mind.”