State legal experts in Poland on Tuesday cast doubt on the constitutionality of a planned pension reform, which they said could be interpreted as expropriation.
Centre-right Prime Minister Donald Tusk announced last month a pension reform aimed at curbing public debt, which is approaching legal limits.
Under the plan the state would take over some of the liabilities of private pension funds, along with the government bonds held to back them up which would then be retired.
This would quickly lower state debt, which is rising towards constitutionally-mandated limits, while the pension obligations would be paid from future tax revenue.
The private funds targeted under the plan include international players like ING, Axa, Aviva and Generali. Polish treasury bonds account for about half of their assets, with the rest held in stocks.
“The draft legislation is designed to deprive companies of part of their assets for the benefit of state institutions, which is a classic case of nationalisation,” experts at the State Treasury Solicitors’ Office said in a statement on their website Tuesday.
“There is a potential risk for incompatibility with the Constitution,” they warned.
The opinion echoes those made by critics of the reforms, which could be implemented as soon as January 2014.
Government officials were quick to insist the planned reforms are legal.
“We have studies by constitutional specialists and economists who confirm these reforms are constitutional,” Labour Minister Wladyslaw Kosiniak-Kamysz told reporters Tuesday.
His top advisor, Jan Krzysztof Bielecki, on Tuesday also “categorically” denied the planned reforms amount to expropriation.
Tusk has vowed that Poland’s 14 private pension funds — known by their Polish acronym OFE — will be able to hang on to assets invested in stocks traded on the Warsaw Stock Exchange.
The plan has rattled markets, as the state pension fund barely takes in enough to cover its current obligations.
Finance Minister Jacek Rostowski says the pension overhaul would allow Poland’s public debt, now at 55 percent of GDP, to be cut by up to eight percentage points over time.
If the debt rises above 55 percent of GDP mandatory spending cuts and tax increases kick in, but with tepid growth the government has allowed the deficit to climb somewhat this year as it tries to avoid tipping the economy into recession.
Warsaw has slashed its 2013 growth estimate to 1.5 percent down from an earlier projected 2.2 percent.
[Image via Agence France-Presse]