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FT: Hungary should keep its second-pillar private pension system

FT called the reverse of the second pillar sytem "a regrettable and retrogade step".

“A regrettable and retrograde step,” the Financial Times called the abolishion of the private pension fund system established long ago in some Central Eastern European countries, and the dismantling of the mandatory pension fund pillar in Hungary.

This situation is unfortunate as member states which are (partially) reversing their systems claim they were forced to take these steps by European accounting rules, FT wrote. The pension reforms could be beneficial in the long term, but they could enhance the budget deficit and debt in the short term.

Last year nine Central European countries lobbied to the EU to take include the expenses of their pension reforms when calculating their budget deficit and debts, trying to avoid unfair treatment and punishment. The EU responded that the rules applied to everyone, offering a small compromise in the case of accounting the pension reform. Hungary, under the pressure to put public finances in order, has renationalized the second-pillar system, FT wrote.

According to FT, it is too late for the EU to rethink the case. Hungary should preserve the second pillar system and freeze payments into them only temporarily and use the time to implement fiscal and structural reforms. Once these take effect, the country could restart its mandatory system, and become an example of best practice for the country, FT wrote.