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Poland's pension reform may be unconstitutional - state's legal advisors
October 29, 2013 / 11:18 AM / 4 years ago

Poland's pension reform may be unconstitutional - state's legal advisors

Polish Prime Minister Donald Tusk smiles after leaving a conference in Warsaw August 23, 2013.Kacper Pempel

WARSAW (Reuters) - Legal advisors to the Polish state said on Tuesday a planned overhaul of the pension system could be unconstitutional, dealing a blow to the government and potentially throwing next year's budget into disarray.

Prime Minister Donald Tusk plans to shift a large chunk of assets held by Poland's private pension funds to the state, a move he hopes will give it more scope to borrow and spend, and help revive the economy.

Critics of the change say it amounts to a nationalisation of private assets, a view the State Treasury Solicitor's Office appeared to echo in a legal opinion published on Tuesday - while the central bank also expressed doubts.

The overhaul "entails taking away non-state property from legal entities and transferring it to a state organisational unit, and therefore, is classic expropriation," the Office said in a letter published on the labour ministry's website.

The constitution allowed for expropriation in certain cases, but only if the aim was "obvious public good" and only in exchange for compensation - criteria it said the proposed overhaul did not meet.

The government disputed the findings of the Solicitors' Office, which represents the state in Poland's courts and issues legal opinions on bills.

Political Credibility

Poland's central bank said on Tuesday it thought the pension overhaul was necessary,

But the draft legislation, a cornerstone of the government's financial plans which has also come under fire from some in the market, "can involve legal risk," the bank said.

"This should be taken into account when approving the proposed solutions."

If the reform is blocked or delayed on legal grounds, the immediate impact will be on next year's budget, which is built on the assumption that a large chunk of the assets in private pensions funds will be on the state balance sheet.

More broadly, it will mean the government will have less to spend on economic stimulus, which could be a handicap before a series of elections starting next year.

Setbacks to the pension plan would also be a blow to the political credibility of Tusk and his finance minister, Jacek Rostowski.

In a response to the State Solicitors' letter, Labour Minister Wladyslaw Kosiniak-Kamysz said the government was "sure" of the pension changes.

"We have opinions of constitutional experts and economists that show that this solution is in line with the Constitution and there is no sign of expropriation."

The proposed reforms have already been criticised by the country's pension funds and public figures including ex-premier Jerzy Buzek and the joint co-ordinator of Poland's transition from a planned to a market economy, Leszek Balcerowicz.

President Bronislaw Komorowski expressed doubts earlier this month and said he would review the plans to ensure they were in line with the constitution.

Editing by John Stonestreet

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