Major industrial action planned over pensions reform

In April 2003, Austria's conservative-populist ÖVP-FPÖ government proposed a far-reaching pensions reform, aimed at making significant cuts in state pensions. The reform is strongly opposed by the trade unions, which are planning major industrial action in protest. The government has rejected a proposal by the social partners to develop their own pensions reform plan.

In December 2002, a special commission established by the coalition government of the conservative People’s Party (Österreichische Volkspartei, ÖVP) and the populist Freedom Party (Freiheitliche Partei Österreichs, FPÖ) presented a report questioning the sustainability of the present level of statutory pensions (AT0301203F). The coalition, returned to office after a general election in November 2002, adopted most of the report’s restrictive proposals aimed at making major cuts in cash benefits and presented a draft pensions reform in March 2003. After a short period of obligatory consultation which expired on 25 April, this draft was due to be accepted by the cabinet on 29 April and to be passed by parliament in June 2003.

The key points points of the planned pensions reform are:

• the staged abolition of the current early retirement scheme (which provides for the possibility for women to retire at the age of 56.5 and for men at the age of 61.5) by 2009;

• an increase in the reduction in the pensions awarded to early retirees (compared with the 'normal' retirement pension), from 3.75% to 4.2% per year of early retirement;

• a reduction of the 'increment points' awarded for every year of pension insurance contributions from 2% to 1.78% (40 years of contributions will thus no longer result in a pension of 80% of pensionable earnings, but only 71.2%); and

• an extension of the period of earnings on which the pension benefits are calculated from the current 15 or 18 best-paid working years (depending on circumstances) to 40 years.

The government argues that such reforms are necessary to maintain the sustainability of the statutory pensions system. However, according to critics, such dramatic and immediate welfare cuts, which are estimated to bring about reductions in pension benefits of over 30% under certain conditions, can hardly be attributed solely to unfavourable demographic prospects, as most government representatives argue. As Karl-Heinz Grasser, the Minister of Financial Affairs, has stated, the planned transformation of the statutory pensions scheme is also intended to finance a large-scale tax reform in the coming years which the government announced some time ago but has proved unable to realise so far.

Some experts argue that such radical changes to the existing pensions system may threaten Austria’s traditional 'pay as you go' (Umlageverfahren) mechanism - whereby current pensions are paid from the contributions of those currently in employment - and undermine the contribution-based principle of insurance, since the 'terms of contract' will so dramatically be deteriorated. Therefore, the question is whether such measures would be compatible with the Austrian Constitution. In particular, employees with interruptions in their working lives and/or longer periods of 'atypical'/part-time employment (mostly women with childcare obligations) will be especially hard hit. As a consequence, even some employees’ representatives affiliated to the FPÖ and ÖVP have expressed reservations about the reform. For their part, the trade unions regard the planned cutbacks as a 'cold expropriation'.

The two parties of the parliamentary opposition, the Social Democratic Party (Sozialdemokratische Partei Österreichs, SPÖ) and the Greens (Die Grünen, GRÜNE), although opposing the government’s proposals, have not organised any broad political protests so far. The SPÖ’s proposal is to hold a referendum on the planned pensions reform. However, the presidency of the Austrian Trade Union Federation (Österreichischer Gewerkschaftsbund, ÖGB) held an extraordinary meeting on 24 April 2003, at which a resolution to prepare for industrial action was passed. Previously, Chancellor Wolfgang Schüssel of the ÖVP had refused a joint proposal from the social partners to develop a pensions reform concept on their own responsibility by autumn 2003 and to postpone any relevant decisions until that time.

As a result of the refusal of this proposal, the ÖGB presidency unanimously agreed to organise 'defence strikes' which its individual affiliated unions will prepare and carry out. Such an escalation of conflict is almost unheard of in Austria, since the last 'defence strikes' were called in the 1950s. The strikes were expected to take place after 1 May 2003. Initial protests were already carried out on 28 April by the Commerce, Transport and Traffic Workers’ Union (Gewerkschaft Handel, Transport, Verkehr, HTV), when some dozens of lorry drivers performed a go-slow 'protest drive' on a motorway, also demanding respect for their special working conditions by the employers (AT0304202F).

The government’s willingness to carry out its pensions reform marks a watershed not only in terms of social security in Austria but also in terms of the government's relations with organised interests in general and social partnership in particular. This is because no previous government had refused a joint initiative of the social partners in such an important public policy area as pensions.