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Starting Over in Pensions: The Challenges Facing Central and Eastern Europe1

Published online by Cambridge University Press:  28 November 2008

Robert Holzmann
Robert Holzmann
Affiliation:
Economist, Social Protectio, Human Development Network1818H Street, N.W., S-10-027World Bank and University of SaarlandWashington, D.C.20433, USA Fax: (1) (202) 522-3252 email: rholzmann@worldbank.org
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Abstract

All countries in Central and Eastern Europe require rapid and drastic restructuring of their public pension schemes for macro- and microeconomic reasons. While initial considerations were geared towards streamlining the unfunded scheme, reducing many distortions and making it financially sound, some transition economies initiated reform plans for a move from unfunded to funded retirement income provision. The paper reviews the need for reform and surveys the discussion and current plans before addressing three central open questions: How to structure the first and unfunded tier? How to finance the transition toward the second and funded tier? What are the minimum financial sector requirements before funded provisions can be initiated? The success of the current pension reform efforts in Central Europe will have an important bearing on developments throughout Europe. A failure in one transition economy caused by bad design, unprojected deficits, or insufficient financial market preparation could discredit a funded pension system in the whole region; a successful move towards an unfunded-funded multi-tier pension scheme in Eastern Europe could positively stimulate the discussion of pension reform in the European Union.

Type
Articles
Information
Journal of Public Policy , Volume 17 , Issue 2 , May 1997 , pp. 195 - 222
Copyright
Copyright © Cambridge University Press 1997

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