In its pursuit of private savings, EU admits state’s failure on pensions

Brussels –  The main problem with the European Union’s competitiveness lies in the money needed but not available, and the political response to this dilemma is pensions and allowances that enable people to live comfortably in old age. The economic ministers of the 27 Member States are determined to create a common system of alternative pensions to encourage people to move their private savings into products other than state pensions, offering higher returns. This would set in motion capital that would otherwise remain idle, pumping money into the real economy in exchange for interest for men and women in their senior years. This is the package, in broad terms, that the Commission and Member States are working on, which was the focus of discussions at today’s Economic and Financial Affairs Council (Ecofin) meeting (17 February). 

It is a pity that the issue is as sensitive as it is critical: on the one hand, there is public insistence on wanting to dip into citizens’ savings, while on the other hand, it is implicitly recognised that governments are failing, or have already failed, to guarantee everyone a decent pension, with the EU offering an Anglo-Saxon model, closer to that of the United States, as a solution. 

Pension funds, supplementary insurance, and new pension products that differ from traditional pensions: all of this moves us away from the concept of the state and the social contract that have been in place until now, risking further alienation from the EU. But it seems that in Brussels, as in other capitals, no one cares. “The main objective of the pension package is to help people secure a more reasonable income during retirement by improving access to more robust and effective supplementary pensions,” says Makis Keravnos, Minister of Finance of Cyprus, the country holding the rotating presidency of the Council of the EU. In other words, a “more reasonable” income, which indicates a recognition that pension payments are currently unreasonable and therefore inadequate. 

EU Court of Auditors, Commission failed to promote supplementary pensions

 The Commissioner for Economic Affairs, Valdis Dombrovskis, rather than correcting or clarifying, confirms: “The aim of the pension package is to ensure that [pensions] are adequate during non-working age.” The European Commission, therefore, also recognises that state pensions need to be reviewed. However, the EU executive cannot legislate on this matter, as it remains the exclusive competence of the Member States, and so this is the direction being taken. 

The message being sent is not the best, especially given the way it is being conveyed. The European Union appears distant from its citizens and their needs. The Green Deal, with all its understandable and commendable reasons, has often been perceived by people as a package of measures that only asks them to pay to repair their car, boiler or fixtures. Now there is a European Union that is asking people to pay to secure their pensions, after a lifetime of work and sacrifice no longer guarantees adequate pensions. The states as a whole seem to have betrayed their duty, and the Europe of states is not helping. 

After all, “the watchword now is competitiveness, and this savings and investment union project is of great importance,” the Cypriot finance minister reiterates. The pension package is passing through this union of savings, and the EU presses ahead, convinced it is the right path. Whether this is really the case remains to be seen.