This page has been archived and commenting is disabled.
There Go Irish and Hungarian Pensions?
Stephen Collins, Harry McGee and Mary Minihan of the Irish Times report, Welfare and pensions hardest hit in €15bn package of cuts and taxes:
A sharp increase in taxation, deep cuts in social welfare payments, a reduction in the minimum wage and a modest property tax are among the elements in the Government’s four-year National Recovery Plan.
Tax relief on pensions will be reduced dramatically and recipients of public sector pensions will face cuts for the first time.
The 140-page plan published yesterday outlines a package of measures designed to reduce public spending by €10 billion and raise an extra €5 billion in taxes by 2014.
The plan will be front-loaded with a €6 billion adjustment coming in the 2011 budget, to be published on December 7th. That will involve extra tax of about €2 billion in a full year and cuts in social welfare of €760 million.
The Government’s prospects of getting the budget through the Dáil eased last night when it emerged that Independent TDs Jackie Healy-Rae and Michael Lowry are likely to support it.
With the backing of the two Independents the Government would have a potential 82 supporters while the Opposition will have a potential maximum of 80 if Pearse Doherty is elected as Sinn Féin TD for Donegal South West tomorrow.
EU economic and monetary affairs commissioner Olli Rehn welcomed the plan – which maintains corporation tax at 12.5 per cent – saying it represented “an important contribution to the stabilisation of Irish public finances”.
He added that a €6 billion adjustment in the 2011 budget would be “appropriate”.
Taoiseach Brian Cowen has said the plan would provide the basis for surmounting the deepest economic crisis since the foundation of the State. “We are a smart, resilient and proud people, and we are going to come through this challenge because we love our country and we want to make sure our children have a good future,” he told a press conference to launch the plan.
“Lessons will have to be learned . . . It’s a challenge that can be surmounted. I am confident that talent and will and courage of our own people will make this a reality for us as a people,” Mr Cowen said.
As part of the plan the minimum wage is to be reduced by €1 to €7.65 an hour in next month’s budget. Social welfare cuts of almost €3 billion will take place over four years as part of a package of measures to encourage people to get involved in “employment enhancement” schemes.
Income tax changes to rates and credits combined with the reduction in relief on pensions and other measures will lead to a significant rise in the tax take from those already in the tax net. It will also bring more people into the tax net for the first time with a drop in the entry point from €18,300 to €15,300.
The plan states that the after-tax income of a single person earning €55,000 will fall by €1,860 a year, or about €36 a week, a drop of 4.8 per cent. The after-tax income of a married single-income family earning €55,000 will fall by €2,310 a year, or €44 a week; a fall of 5.4 per cent.
As a result of changes to pension reliefs, the after-tax income of a person earning €55,000 who contributes to a private sector pension will fall by a further 2.5 per cent by 2011.
The Croke Park deal which protects the pay of public service workers remains unaltered in the plan but new entrants to the service will start on 10 per cent less than existing salaries and their pension entitlements will be considerably less generous. Existing public service pensioners will be face cuts for the first time, with an average reduction of 4 per cent.
There will be a reduction of 24,750 in the numbers employed in the public service over the period by 2014 compared to 2008, with half of this having already been achieved, while work practices will be reformed to allow for flexibility and more efficient services.
A property tax of €200 a year and water charges of about the same amount will be phased in by 2014.
No change in the State pension is proposed but the plan reiterates a decision to increase the qualifying age to 66 in 2014. The capital budget will be cut by €1.8 billion for next year.
When asked last night about the reasons for the massive adjustment, Mr Cowen referred to the collapse in the construction industry. “People were expecting a soft landing and it didn’t happen. The analysis was wrong and the advice was wrong. I take responsibility for that and I have never ducked that.”
Opposition parties were critical of the plan, with Fine Gael leader Enda Kenny saying it lacked details of budgets for the next four years. He said the European Commission had confirmed to him that any incoming government would not be bound by its proposals.
Labour Party spokeswoman on finance Joan Burton called on the Government to clarify the status of the plan, saying it was not clear if the document represented the Coalition’s opening position as it went into talks with the IMF.
This is the the ugly face of austerity. Cut everywhere, even public pensions and minimum wage. No wonder the Irish are pissed off and protesting. It's going to be a very rough four years ahead.
Meanwhile, over in Hungary, Bloomberg reports that the government is is trying to force 3 million people now in private pension schemes back into the state system to help it meet strict budget targets.
Special incentives would be offered to those switching into the state pension plan by Jan. 31, Economy Minister Gyorgy Matolcsy said Wednesday. Those people remaining in private schemes will become ineligible for public pensions -- a move that would effectively cost them 70 percent of their retirement payouts.
At stake is about 2.7 trillion forints (euro9.8 billion, $13.5 billion) accumulated in individual pension accounts and managed by private pension funds.
The government plan, while not nationalizing private pension funds outright as Argentina did in 2008, is expected to make it very difficult for the 18 funds offering pension services in Hungary to keep operating.
Matolcsy said severe cuts will also be made in how much private funds can charge for fees and operating expenses.
Hungarians will automatically be transferred into the state system unless they opt out.
At present, 10 percent of most employees' wages go into a private pension fund, while employers pay another 24 percent into state coffers. Under the government's new plan, those who stay in the private scheme can count only on their own 10 percent payments when they retire.
Matolcsy told reporters the new plan was an "important turning point in terms of economic policy."
Hungary was hard hit by the global financial crisis and is still facing daunting economic challenges. In 2008, it was forced to rely on a bailout of euro20 billion ($27 billion) from the International Monetary Fund and other institutions to avoid bankruptcy.
Government officials this summer have made contradictory statements about the state of the country's finances, increasing uncertainty in the financial markets about Hungary's credibility and hurting the stability of the forint.
Ever get the feeling that the world economy is hanging on by the skin of its teeth? Sure, it's only Ireland and Hungary, but it could easily shift to Portugal and worse still, Spain. All this tells me the Fed, the ECB and central bankers around the world are going to be busy printing money, counterbalancing some of the fiscal austerity taking place right now. Welcome to the future.
»
- advertisements -
yes, the old people will be hit very hard by this crisis.
...and all bondholders made whole.
On the Hungary pension grab:
Nothing surprising, and you will see this happen in the US if finding a buyer of government debt becomes problematic- you will be given a choice of either transferring your IRA or 401K into a government administrated fund, or lose your Social Security and Medicare.
As an American, I found the way this part, from The Irish Times article, was worded a bit odd.
Is this way of describing a tax increase particular to the Irish, or is it something more generally European?
double post.
This may be a artifact of a nearly decade old policey of tax individualisation brought in by a previous neo-liberal neo - amadan finance minister.
Before this time families had certain benefits over individuals - also the calculations may factor in reductions in child benefit although the family example does not mention the number of children.
Bye bye European Welfare State.
Keep the good news coming, Leo. I just hope the 'contagion' spreads here, and we see similar cuts in the USA.
I should be shocked that Irish politicians and top civil servants did not take a 50% pay cut as a leadership example.
Brian Cowen gets paid more then Obama and a parliamentary politician gets paid roughly 100,000 euro + expenses.
I seem to remember reading the De Valera goverment of the 30s making big cuts in salary yet at least in this present "plan" these cuts are missing.
I cannot accept this "austerity" if our sacrifices pay risk debt holders and their servants in Goverment circles.
I still have 20,000 in a post office bond that I foolishly kept after liquidating most of my cash and Goverment bond assets when NAMA was first mentioned - I should have known better - this goverment is rotten to the core and there is no patriotism amongest this gang of rascals.
If they or their colleagues across the parliamentary floor go along with this travesty then they will be looking for another 20 grand to fill their banker black holes.
Here's an idea: rather than starve, they should overthrow their leaders, kill the banksters that caused this and repudiate their debt.
There was more detail on the National Irish Pension Fund in the announcement and some of it is ominous. It is plainly not good news for future Irish pensioners but it also has implications for elsewhere should other governments follow similar principles.
http://notayesmanseconomics.wordpress.com
deleted - double post
I have argued that this fund should be used as a deposit base for a national industrial bank to be lent out for capital creation projects but instead they will waste this money to buy more debt !!!
This goverment is full of fools and scoundrels.
Hungary is a different story, and one that's going on around ex-communist EU - prodded by Brussels, using the economic crisis as an excuse to pillage private pensions. The public scheme promised too much and can't afford to pay it, so everybody who was allowed or in some states even required to partially opt out is being forced to move their assets into the public system, to bail out the near-term shortfalls and then when their turns come to collect, twist in the wind.
15 Billion Euro in reductions dosen't solve a 250 Billion Euro problem in Ireland
http://www.tv3.ie/shows.php?request=tonightwithvincentbrowne&tv3_preview=&video=29656
PUNISH THE WEAK IN THE SOCIETY!!
you've got to love this day and age. The banksters go free and the old and poor get suckerpunched.
Somebody had to say that. Notice the blatant lack of any mention of "banks", "investors", "bondholders", and such from the press releases? No mention of politicians taking even a 5% pay cut (which they would make up in posting more expenses anyway). Even a token gesture would mitigate some of the civil unrest to come.
BANK HOLIDAYS COMING TO US in 2011; be forewarned and keep enough cash for at least a week. Empty your safe deposit box. Creeping of incremental fascism arrives with a vengeance. They have no other way out. The fall of BAC will set off a domino effect.
Trying to figure out why Cowen so brazenly, openly and willingly sold out his people to the banksters, it finally occurred to me that they must have something really, really bad on him. Because that would explain a lot.
Why pick on Cowen? I mean, Cowen as opposed to whom? Gordon Brown? Bush? Obama? Sarkozy? Trichet?
List, instead, the politicians and central bankers who haven't sold their people out. It'll be less work, as it's a much shorter list.
In fact, who would be on such a list? Merkel says she's going to be on it, but not just yet.
Yeah - they are holding his pension!!!
Pundits often go on about fears of contagion to other countries on the Euro zone's periphery. I can't think of a reason that the contagion won't as likely spread to heavily indebted states outside of the Euro zone. Once the market freaks out about the threat of default on Irish, Greek, Portuguese, and Spanish bonds, and demands greater returns on loans to governments, it will likely start to freak out about the threat of British, American, and Japanese defaults. The contagion could spread beyond the Euro zone without skipping a beat.
You are correct, the world is holding on by the skin of it's teeth. We may see world hyperinflation real soon.
The Irish cuts are nasty, but existing (and retired) public-sector workers are being largely spared the pain. Even after taking a cut earlier in the recession, the Irish public sector remains highly cosseted.
The public sector and financial oligarchy criminals are resting comfortably atop a stalk gradually weakening by incessant thievery, until the stalk fails.
Of course "it all started in Belgium. In 2008." What is a King with no country? No King in my book. So of course "the criminals will now return to the scene of the crime." Quite the "crime spree" so far, no? And of course "it was the South Koreans who coined the phrase I M Fucked" as it relates to the IMF...in 1997..."and now some of them are in actuality getting killed." And "Maria B has been reporting live from Singapore" and "Warren Buffet called them financial weapons of mass destruction" and "the Aircraft Carrier George Washington is on the move." Again "i will not get into details as to why i think we're on the brink"--suffice to say "if a truck driver can figure it out so can you." Be thankful on Thanksgiving.
are you on meth?
Some time about the summer solstice of 2008, the small nation state of Belgium rejoiced, its citizens singing, dancing it the streets, casting a veritable plethora of rainbow colored Unicorn skittle shits (patterened after the ones freely roaming the offices of Goldman Sachs) about freely to celebrate the re-institutionalization of the pomme frite in the Senate Dining Room even though they never were pulled from the menu but only referred to as Freedom Fries. It was rapt and sinecure recognition of such, along side of Nancy Pelosi's rise to preeminent power in the House of Representatives who, in response to the Senate Dining Room's subtle political disenfranchisement of culinary delights, ordered her Boeing 737 to be amply stocked with Dom Perignon, caviar and her very own live Unicorn under the pretense that her photo-op session with the Afghani and Iraqi political leadership might have produced superior pol results with Zogby, Rasmussen and Arrogance Weekly had one in fact been present. Especially of it were able to sing Kumbaya in the key of F#. She had deduced such an ancillary benefit of this fundamental proposition when asked by Afghani President Whereza Mypayola if she'd brought him the new underaged male sex goat as had been promised by the previous, outgoing administration, as he was dearly worried about America fulfilling its strategic promises. Or that at least has been the translation afforded by the blind, deaf mute hired by the State Department under the employment quotas as established under the expanded 17,324 page amendment to the American with Disabilities Act which nobody even to date, has bothered to read.
Now that's third or fourth hand, passed me down rumor which I was told was solid information which led me to believe was what "started it all" or whatever the quote was "in Belgium in 2008" causing celebrations and shit. Particularly amongst the Unicorn and goat farmers.
I can back that up, knukles. I had a second cousin from a previous marriage whose aunt was a bartender at the events. So, it's true!
Maria B "live in Singapore"? So sorry I haven't had cable/satellite for over a decade.
And I must admit I haven't been paying close attention, but what did the Belgies do in '08?
So, you know that you are using quotations incorrectly in every single response you make?
I don't have much of an idea what the future holds, but one thing I do know is that "unpayable debts--don't get paid" . How exactly this plays out, I dunno, but it seems that pensions getting cut back or even eliminated could be a big part of it.
Poland is considering nationalising all private retirement plan contributions "but only for 2 years" or doing some creative accounting paramount to that.
Anyone with money in 401k should look closely at what is happening in Poland and Hungary (other euro countries dont really have private but state sponsored plans to be nationalized)
Regarding private retirement savings: You have all been warned.
The writing is on the wall, and it reads "CONFISCATION".
(And I assume, and am willing to bet, that Leo Kolonasskiss is just fine with that.)
Amen to that Akak.
Why do you think that 401(k)'s, IRA's, and real estate are given tax breaks? Because the government knows that they're there as a piggy bank, to be broken in case of a self-determined emergency.
The bondholders of Irish banks had no state guarantee, but they get made whole (with interest). The Irish pensioners had a state guarantee, but will, in the end, get well under 100%. This is the global template.
It's also the template for U.S. Social Security and European pensions: there's a special tax, which supposedly goes to fund your pension. But it's actually an ordinary tax, sweetened a little with a fairy tale. The confiscation you speak of is not just future, it is past and present, ongoing to fund the increasingly thin facade another month, year, or whatever.
They let people contribute for 15 years...and took 7% out of every contribution as "fees" (much better than 2/20 btw) for the management to just buy bonds with the money.
Now they are about to pull the rug - and there will be NO DEMONSTRATIONS. I will keep repeating, Poland is full of chumps and it makes me sad cause I am Polish.
Poland will be just fine , they lit the flare on the first big shale gas well last week, that alone will cut a huge bill each year that goes to russia without love ... , the economy there is sound and the EU are punishing them for having fully funded pensions which make the deficit look worse than the unfunded pensions the rest of europe have
They signed 30 year take-or-pay gas contract with Russia just last month; take it FWIW
drink geen juices and buy silver?
The guys over at http://www.forecastfortomorrow.com/news are saying in their latest newsletter that silver is going to $50. I am only a subscriber cause my friend made a motza in the market crash. These guys called that 11 months before it happend. So I am betting that silver will rocket soon after a big dip. Time will tell.
Geen juices give me gas.
so?
http://maxkeiser.com/2010/11/25/endless-nightmare/
.
ps. it is just a phase. everyone has their own digestive flora.
as has been said " when you stop farting, it's over."