Tue, 30 Nov 2010 00:45:49 +0000
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.