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GT verdict: Pension reform? The government has not found the courage to show the stop sign, but at least it is stepping on the brake

Tomáš Brabenec | 11.5.2023 | News

The government has put forward a so-called pension reform, but in my opinion, it should not be called a reform. However, I understand that in the context of communication towards the public, such a concept is sexier than “parametric change”. In fact, only the expected partial adjustments were presented, which do not have the potential to solve the structural problem that was presented during the spectacular one-hour introduction of the press conference in the longer term.

The “reform” does not address the long-term structural deficit of the pension system, which will continue to be loss-making – despite the measures introduced, pension expenditure is expected to continue to exceed pension income. Acceptance of a deficit system can never lead to a solution to the problem. The solution proposed by the government does not have the ambition to put a stop to the crisis, but only to apply the brakes a little more.

It also appears from the government plans that the only increase in revenues of the pension system will come from rising minimum pension contributions for the self-employed. Raising levies on sole traders can significantly reduce their incentive to be inventive, which is the basis of a healthy economy. Therefore, I believe that the government should look for other (non-financial) ways to compensate sole traders for the loss of motivation.

The often lively topic of the retirement age seems to be obsolete for the time being, as the change will have no impact in the short term. According to the government, the retirement age should be targeted so that we spend 21.5 years in retirement. As life expectancy increases, this will affect people born in 1985 and later, approximately, i.e. people who are now under 40. No pension reform can do without extending the retirement age. It is therefore positive that the government is trying to find a system that would allow demanding professions to leave earlier.

Criticism is easy and finding “politically viable” solutions to the unprecedented economic situation facing this government is extremely difficult. It is necessary to start somewhere and this government deserves praise for resolving to make the changes presented today, despite the risk of losing some of its voters.

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