Sunday, March 13, 2011

Week in review…

The government finally passed its controversial pension change in the week past (here and here and here), making good on its pledge to rollback a reform once considered one of the best. Prime Minister Donald Tusk presented the step as a glorious victory for all those who care about future retirement pensions, though of course he left out the fact those pensions will likely be cut and a lot of once overt debt has now been hidden. The funny thing about covert debt is it has to be covered anyway one day, whether through increases in pension contributions (that is, higher taxes) or lower retirement payouts.

Tusk also continued his move to the dark populist side of the force political spectrum by saying the government's move was a clear defeat for evil financiers and investors and speculators who work for the privately managed pension funds who will see the pension transfers they get reduced sharply. Tusk and allies have consistently branded all critics of their plan as either stupid or venal. Attacking the credibility of your opponent is of course a widely used one, though the mastes of this in Polish politics is Law and Justice (PiS) leader Jaroslaw Kaczynski. What's that old adage about turning into the thing you hate most?

One should never use talk of the dark force lightly. And I don't. But if you were  to cast Star Wars right now, Donald Tusk would clearly be Darth Vader, a once noble leader turned to the dark side. Jan Krzysztof Bielecki could be the Emperor. Finance Minister Jacek Rostowski and Labour Minister Jolanta Fedak would be Generals of the Stormtroopers. I guess this would mean Leszek Balcerowicz is Obi-Wan Kenobi. The time of this new film would be before Star Wars, meaning Luke and Leia would not yet have been revealed. Fittingly, Tusk has two kids. Will Kasia and Michal Tusk lead the rebellion? Time will tell.

Time is something in short supply for the government. The pension plan was approved on March 8 and is to be signed by the president by the end of March, so that the government can be ready to give a needed legal adjustment period of 1 month (which is seen as the minimum). This means the bill has to see a first reading in the lower house, committee work, a second reading, more committee work, and then finally lower house will vote on the third, and final, reading. The Senate then gets a crack. If it makes any amendments, the lower house must vote again. Assuming it is passed, only then does the bill go to President Bronislaw Komorowski for his signature. The sheer number of hurdles to clear was clearly designed to make legislating a thoughtful process. Having to fast-track such an important change through parliament is a bit pathetic.

That's not all. Tusk's Civic Platform (PO), which controls the Senate and from which hails the president, is fully behind the changes. But the Polish People's Party (PSL), the junior ruling coalition partner, does support them, but also pays lip service to making the privately managed part of the pension system fully voluntary. This would give people the choice of having all their retirement pension savings in the state part of the system or in the privately managed part. This seems fair on the surface, but would probably undermine the entire pension system. The fact all future pension money is what is called notional -- meaning it does not exist, it is only a promise by the state to pay a certain amount; all pension contributions are paid out to current pensioners at present -- makes the entire exercise a little like playing with other people's money, as in Monopoly.

One man is not taking things lying down. Krzysztof Rybinski, a former deputy governor of the central banks, chief economist for several banks, prominent economic commentator in Poland and blogger, plans to create some form of class action suit to sue the government. Though he is close to an opposition party (PJN), some 45% of respondents told one poll they'd be willing to sign.

In the end, the only really good news for the PO and Tusk is the situation is so complicated few voters really grasp what is going one. The opposition is so moribund few other options exist. The sad reality of the political scene at present.

To close, I'll lighten the mood a bit and instead give you with the chance of a lifetime. Few people will have been so privileged to avoid paying hundreds of whatever depreciating currency they currently use to bear witness to an asset so depreciated they can only call him classic. Click here to see what I'm talking about.

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