WRITTEN QUESTION E-1984/97 by Esko Seppänen (GUE/NGL) to the Commission (9 June 1997)

Subject: Member States' level of debt in terms of pension liabilities and meeting obligations in respect of pension liabilities under the conditions imposed by the single currency

The EU Member States are different, and they have different socio-economic structures. Different countries have different pension systems and there are many places where the public authorities have not provided cover for future pension outgoings.

That being so has the Commission ascertained the level of debt in terms of pension liabilities in the various Member States, and how will it guarantee that each country will be able to meet its own obligations in respect of pension liabilities under the conditions imposed by the single currency?

Answer given by Mr de Silguy on behalf of the Commission (4 September 1997)

Social security systems providing for retirement differ between Member States in many respects, including coverage, eligibility, level of contributions and benefits. Moreover, in most Member States there is typically more than one scheme established for different occupational categories (blue and white collar workers, civil servants). Nonetheless, a common feature of public retirement schemes is that most of them operate on a 'pay-as-you go' basis, under which current benefit entitlements of pensioners are financed out of current revenues collected from the working population. There is thus no 'coverage' of future pension liabilities in the form of a capital stock, and the viability of the system rests on inter-generational solidarity - the willingness of each generation of working age to support the previous generation.

The Commission has not itself carried out any estimates of pension liabilities in Member States, but a number of studies have done so in recent years. Typically, the present value of pensions to be paid in the future on the basis of accrued rights exceeds a country's current annual gross domestic product (GDP). However, such calculations are highly sensitive to changes in the underlying assumptions (life expectancy, employment rate, price and wage trends) and have to be interpreted with caution. A high ratio of liabilities to GDP does not necessarily imply an imbalance in pay-as-you-go pension schemes. Any judgement on the sustainability of a scheme depends on the projected resources available to pay for the accrued pensions, and future developments in employment and per capita income (((For further information including quoted results of pension liabilities estimates, see European Commission, 1997 Annual Economic Report, Brussels, 12.2.1997; II/671/96-EN). )).

In any case, it is not the task of the Commission to ensure that Member States will be able to meet their obligations with respect to pension liabilities. This is within the sole responsibility of each Member State. The economic and monetary union and the introduction of the Euro currency has no bearing whatsoever upon this responsibility, nor does it have any direct impact on the sustainability of a pension scheme.