* Pension reformers want EU leniency on deficits, debt
* Poland may bloc EU decisions unless pension issue resolved
* Poland no longer demands changing accounting rules
By Marcin Grajewski
BRUSSELS, Oct 27 (Reuters) - Led by Poland, European Union
countries that have overhauled their pension systems may press
at an EU summit this week for leeway on their budget deficits
and debt that would reflect full costs of the reform, diplomats
say.
Nine countries, including Sweden and the Czech Republic,
demanded in August to be allowed to write off the full cost of
pension reform from their deficit and public debt, which would
help them avoid EU disciplinary action. []
The proposal came as part of a debate on sharpening EU
budget discipline rules to ward off a sovereign debt crisis,
with key decisions expected at the bloc's summit on Thursday and
Friday.
The executive European Commission has gone only some small
way to meet the demand, proposing that pension reformers enjoy a
5-year period during which they can count on leniency if their
budget gaps go over the EU's ceiling of 3 percent of gross
domestic product and/or their debt exceeds the cap of 60 percent
of GDP. []
Poland, Slovakia and other countries believe the proposal is
inadequate and will fight for this leniency to be applied
forever, two diplomats from central and eastern Europe said.
Poland may go as far as to block key decisions on new budget
discipline rules unless it has its way on the pension reform
costs, one diplomat said.
"Sometimes blackmail is a tool you can effectively use in
the EU," the diplomat said.
NO CHANGE OF ACCOUNTING RULES
Poland has dropped its demand for a change in the 27-member
EU's accounting rules to allow state contributions to private
pension funds to be written off from the deficit and debt, the
diplomat said.
But Warsaw and others want to be allowed to avoid EU
disciplinary action if their deficits and debt topped the bloc's
limit as a result of the pension reforms.
This would encourage other countries to carry out reforms
which are needed because of their ageing populations but which
have provoked protests in some cases, they say. []
[]
The countries also say that investments in pension funds do
not have the effect of fiscal loosening on the economy.
Those countries have created or plan to set up private
pension funds, to which the state-supported, pay-as-you-go
pension systems contribute certain sums. As a result national
budget subsidy to the pension system needs to be higher.
Polish pension reform costs now run at 2.5 percent of GDP.
The second diplomat argued that prospects of EU disciplinary
action for an excessively high deficit or debt may encourage a
country to dismantle its pension reform. Hungary has suspended
state transfers to private pension funds to cut its deficit
faster.
"Countries which have reformed their pension systems will be
tempted to take money from the second pillar of the pension
system and move it to the first pillar to avoid being punished
for a high budget deficit," another diplomat said.
"Countries that have not reformed their pension systems will
have to do so at some point, due to ageing, so their deficits
are now artificially lower," he added.
But Germany raises objections to the plan as it wants the
bloc to adopt the strictest possible fiscal rules.
Pension reformers are Lithuania, Latvia, Bulgaria, Sweden,
Slovakia, Hungary, Romania, Poland and the Czech Republic.
(Editing by Stephen Nisbet)
