Attempt to delay European nation’s looming debt crisis
(WND) NEW YORK – Quietly, as the looming possibility of a U.S. military attack on Syria dominated news internationally, the government of Poland announced a decision to confiscate half of the nation’s pension funds in an attempt to delay an impending government debt crisis.
While details remain hazy, Reuters reported Sept. 4 that Polish Prime Minister Donald Tusk announced a government decision to transfer to ZUS, the government pension system, all bond investments in privately owned pension funds within the state-guaranteed system.
Polish Finance Minister Jacek Rostowski said the change will reduce Polish national debt about 8 percent of Polish Gross Domestic Product, or GDP, a move that allows the Polish government to resume another round of aggressive debt creation by borrowing in international markets, as reported by ZeroHedge.com.
By confiscating, or otherwise “nationalizing” the bonds held private retirement accounts of Polish citizens, the government – with public debt currently standing at approximately 52.7 percent of GDP – circumvents two threshold restrictions that deter the government from allowing debt to rise to over 50 percent of GDP, followed by a second deterrence that kicks in when national debt hits 55 percent of GDP.
Reuters reported that by shifting bonds held in private retirement accounts into ZUS, the government can book those assets on the state balance sheet to offset public debt, giving the government more scope to borrow and spend.
As is the case with other nations in the European Union, Poland, faced with slowing economic growth, a grim job situation and declining tax revenues, has been forced to borrow to maintain the nation’s large social welfare system without imposing austerity measures.
International private investment advisers reacted with shock and dismay.
The reform is “a decimation of the [private pension fund] system to open up fiscal space for an easier life now for the government,” Peter Attard Montalto of Nomura Securities told Reuters. “The government has an odd definition of private property given its claims this is not nationalization.”