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Poland eyes pension reform deal by end-May

Poland’s government hopes to wrap up politically difficult negotiations with labor unions over crucial pension and labor market reforms by the end of May, a senior official told Reuters on Monday.

Warsaw, which is battling labor shortages in some sectors of its economy, wants to encourage older workers to stay in the job market by introducing “bridging pensions”, reducing payouts to those who have the right to retire early under current rules. “We begin a cycle of meetings with labor unions and should finalize them by end-May,”

Prime Minister Donald Tusk’s top aide Michal Boni said in an interview, adding that the government expected the talks to be very tough. “Altogether, the ‘50+’ program, including pension system reform and prolonging the professional activity of elderly workers, would help save 16 billion zlotys ($7.41 billion) for the budget in the period to 2015,” Boni said. The current pension system allows around 1.3 million people -- mainly teachers, doctors, nurses and miners -- to retire after as little as 15 years of service. The government wants to reduce this number to just 140,000. The pension reform talks between the government and the labor unions are due to start on April 22 or 23.

“The biggest problem are the teachers,” Boni said. “We want to stick to medical criteria (involving hard physical labor) in devising the new list of professions entitled to early retirement. Miners, steelworkers - yes, but why teachers?” Poland’s biggest teachers’ union, representing around 300,000 people, has criticized the government’s proposal.

“We don’t accept the changes sought for teachers,” Slawomir Bloniarz of the Polish Teachers’ Union (ZNP) told Reuters on Monday. “The union definitely wants to maintain the early pension system.” The union has not said whether it would call for strike action if the reform plans go ahead. Boni said the government was ready to discuss some type of transition period that would allow teachers to continue benefiting from early pensions for a few years more before switching them all to the new system. Underlying the reform plan is the concern, that rising labor shortages in central Europe’s biggest economy are fueling wage growth and inflation, which stood at 4.1% in March, well above the central bank’s 2.5% target.

The normal retirement age in Poland is 60 for women and 65 for men, but the government estimates the average age of people leaving the job market stands at 56 and 58 respectively. The “50+” program also envisages tapping EU funds to expand adult education and retraining to match skills with market demand. (Reuters)