Pensions, unemployment under scrutiny by Crisis Committee

With over 23 million unemployed in the Europe Union and the jobless figure having risen in every member state since last year, how Europe is coping with the crisis and the effect on pension systems were discussed on Thursday 28 January. The damage the crisis may do to Europe's pension systems and its social model was under particular focus in the hearings by Parliament's special Crisis Committee. MEPs quizzed experts on both unemployment and the pension problem.

The latest figures from Eurostat, the EU's statistical agency, show unemployment in the euro area hit 10%, while across the whole EU it stands at 9.6% in December 2009.

The crisis has dramatically affected public revenues and thus weakened already vulnerable public pensions systems across the EU.

German Liberal Wolf Klinz, who chairs the special committee, said the “appalling situation of unemployment” and insufficient public funding meant “long term reforms” to keep Europe competitive, were essential.

“Cost of ageing populations 10 times higher than crisis”

The OECD's principle economist, Edward Whitehouse, told the hearings that in his view pension reform should stay on track as the cost of ageing populations will be 10 times higher than the cost of the crisis. He said he feared the financial crisis might turn into a decades-long social crisis.

Austrian MEP Othmar Karas from the centre right European People's Party asked those gathered whether they thought it was possible to create an “EU model” across the board. However, many speakers agreed that pan-European pension system harmonisation is extremely hard due to the differences between member states' systems.

Private pension funds warned

The rapporteur for the Special Committee, French Socialist Pervenche Berès said she thought that private pension funds should rethink how they invest savings and be more conservative with the money of people closer to retirement.

Czech trade union representative Vit Samek said that public “Pay-As-You-Go” pension schemes should remain the core of pensions systems in most countries and “the best solution is to have many more children”.

A “relaunch of the single market”

Former EU commissioner Mario Monti called for the relaunch of the single market project in a way that would make it socially acceptable to people - just like the Scandinavian “flexicurity”. He told MEPs that maintaining or enhancing social services in today's context might necessitate higher and more progressive taxes, which must lead to greater harmonisation of fiscal policies to avoid tax competition.

 Oxford professor Sir Tony Atkinson suggested the introduction of a “guaranteed minimum income for children” to be funded by taxing pensioners.

Supporting role of local government “hard hit by the crisis”

 On the role of local government, Jeremy Smith, Secretary General of the Council of European Municipalities and Regions said in many member states local government is a substantial provider of social support but because revenues have been “hard hit by the crisis it's tough for them to support those who are hard hit by the crisis”. He also said further cutbacks are inevitable.