Czech opposition tells banks to ignore government pension reform

Reuters News
Posted: Nov 02, 2012 1:33 PM
Czech opposition tells banks to ignore government pension reform

PRAGUE (Reuters) - Czech's left-wing opposition advised asset managers on Friday to ignore a government pension reform slated to launch in January and wait for the next election after which the changes may be reversed.

The reform, as planned by the centre-right administration of Petr Necas, will allow people to divert some of their social insurance payments to private pension funds, lifting part of the burden of caring for an ageing population from the state budget.

ING bank said on Thursday it had decided not to take part in the reform, citing the political risk and because it said the reform lacked wide public support.

Bohuslav Sobotka, head of the Social Democrats party which leads in opinion polls, said his party would cancel the private savings scheme if it wins the next election.

"We warn them (pension funds) not to do it, wait with the decision until after the election and wait on how the appropriate laws will be changed then," he told journalists.

The Social Democrats have criticized the plan as badly timed and have said it would lead to a large drop in budget revenue at a period of economic recession and falling tax collection.

Although Necas's administration has pushed through all main laws regarding the reform, it has not been able to win approval for a required implementation bill after it was vetoed by President Vaclav Klaus, which could complicate the launch.

Necas has not been able to quell a rebellion among his own backbenchers and his cabinet is facing a confidence vote next week which could trigger an early election.

Sobotka's Social Democrats would be the likely winner of an election as they have been leading opinion polls with a wide margin ahead of Necas's Civic Democrats.

(Reporting by Jana Mlcochova; Editing by Michael Roddy)