The announcement made on Wednesday by the Fidesz government’s economy minister, György Matolcsy, regarding the controversial pension measures has since attracted international attention and skepticism from Europe and the United States.
The latest move of giving Hungarians the choice of transferring pension funds from private firms to a state pension program isn’t seen as a fair option for citizens by any means. Bloomberg News headlines have referred to the reform as a “Nightmare Pension-Fund Ultimatum.” Furthermore, it drew close attention to the fact that the government will automatically transfer private pension funds to the state system by January 31, 2011, unless fund members indicate otherwise.
Other media publications as well are having difficulty in conveying the sensible and logical rationale behind the government’s plan, which was first mentioned weeks after the elections earlier this year. An article from The Wall Street Journal was unable to summarize György Matolcsy’s statements without using words such as “force” and “lose rights.”
An article in The Economist’s online blog stated, “Before their choice was taken away from them, surveys showed that only 30% of fund members were planning to opt back in to the state pension.” At least the economy minister’s words are relatively clear, stating that those who opt out of the proposed state program will be “going their own way” and “are no longer part of the solidarity-based state pension system.” On the one hand, it does seem that the ministry has been very effective in alerting people to the harsh reality of the intended state pension plan.
Furthermore, after just seven months in power, the government’s appetite for democratic values and ideals are being closely examined. An article in The Guardian’s blog consistently questioned and criticized the timing of the government’s plans for the Constitutional Court. “It is conceivable that before too long Hungary will look more like Russia’s guided democracy than like any pluralist western democracy with its checks and balances.” Changes in 2011 to the constitution may have powerful implications for a country who modeled its Court after the German Constitutional Court just over 20 years ago in 1989.
The markets have also reacted to Matolcsy’s announcement. The BUX stock index fell more than 5.6% in the two days after the announcement, bond yields spiked and ratings agencies expressed their concerns as well, making the country’s downgrade to “junk” status in the near future a viable reality. Marketwatch.com reported that the forint fell against both the euro and US dollar, with the dollar gaining 1.7% and the euro 1% as the markets grasped the repercussions of the government’s wish to nationalize much of the private pension business. Subsequently, analysts at Danske Bank wrote to clients notifying them of an anticipated change in their projections for the forint, projections that would take a more ‘negative stance’ according to Marketwatch.com.
We can expect to see more reactions to the government’s pension plans in the next two months as January 31 approaches. (Whitman Davis)