* EU leaders agree to look further into pension reform costs
* Pension reformers want leeway on budget deficit, debt
* Some countries are dismantling pension reforms
(Updates with summit's final statement)
By Marcin Grajewski
BRUSSELS, Oct 29 (Reuters) - European Union leaders agreed
on Friday to take a closer look at demands from a clutch of
states to be granted leeway on budget deficits to reflect costs
associated with overhauling their pension systems.
Resolutions from an EU summit went some way to accommodating
their demands, though the bloc avoided making firm commitments.
Nine central and east European countries plus Sweden
demanded in August to be allowed to write off the full cost of
pension reform from their deficits and public debt, helping them
avoid EU disciplinary action over fiscal slippage.
[]
The 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
subsidies to the pension system needs to be higher.
The executive European Commission made a small concession to
the demand in September, proposing that pension reformers enjoy
a five-year grace period in which their budget gaps can exceed
the EU ceiling of 3 percent of gross domestic product and/or
their debt exceed the cap of 60 percent of GDP. []
Poland, Slovakia and other countries believe the proposal is
inadequate and want the grace period extended.
The summit agreed to continue the debate, but the leaders'
statement was carefully hedged to avoid clear promises.
It said EU governments should "speed up the work on how the
impact of pension reform is accounted for the implementation of
the Stability and Growth Pact (budget discipline rules)."
EU government experts should also report back to summiteers
in December, "acknowledging the importance of systemic pension
reform and a level playing field within the (pact)".
Germany objects to granting leeway, as it wants the bloc to
adopt the strictest possible fiscal rules.
TOUGH DEBATE
Polish Prime Minister Donald Tusk welcomed the statement.
"There had been a threat of closing this discussion (on
pension reform)... We have averted this threat. I assume there
will be many debates and quarrels, but the debate continues," he
told a news conference.
The proposal on pensions was part of a debate on sharpening
EU budget discipline rules to ward off the risk of a future
sovereign debt crisis, with key decisions taken on Thursday.
[]
The nine states argue a decision in their favour 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 also say that investments in pension funds do not have
a fiscal loosening effect on the economy.
Officials in Poland, where pension reform costs run at 2.5
percent of GDP, have said the prospect of EU disciplinary action
for an excessively high deficit or debt would encourage
countries to dismantle pension reforms.
Hungary, meanwhile, has suspended state transfers to private
pension funds to cut its deficit faster, while Estonia and
Latvia have reduced their payments.
The other pension reformers are Lithuania, Bulgaria,
Romania and the Czech Republic.
(Editing by Rex Merrifield, John Stonestreet)
