Thousands take part in national protest against pension reform

Thousands of trade union members gathered to protest outside Bulgaria’s parliament building on 30 November 2011 when MPs were to vote on increasing the age of retirement without consulting the social partners. A protest declaration was handed to parliament, and MPs from the ruling party agreed to withdraw the proposal and continue negotiations with trade unions.

Background

On 30 November 2011, Bulgarian trade unions mobilised 35,000 members of the Confederation of Independent Trade Unions in Bulgaria (CITUB) and Confederation of Labour Podkrepa (CL Podkrepa) to protest against government plans to raise the retirement age. The government wanted to raise it by one year from 2012, instead of in 2021 as agreed with the trade unions last year. It would have meant increasing the retirement age for women to 63 years, and to 65 for men and would, the government hoped, reduce the National Social Security Institute’s substantial deficit. The trade unions demanded a consistent and clear pension policy and Patrick Itschert, Deputy Secretary General of the European Trade Union Confederation (ETUC) urged European workers to oppose social regression. The government subsequently withdrew the proposal and agreed to trade union negotiations.

Changes in the Social Security Code

Two major changes were made to the Social Security Code (SSC).

The ‘Swiss rule’ for the annual indexation of pensions will be partially repealed. Article 100 of the SSC sets out the Swiss rule, which states that any pensions granted before December 31 of any given year should be increased annually from July 1 of the following year; the rise should be a percentage equal to the total of half the percentage increase in contributory income and half the percentage rise in the consumer price index for the preceding calendar year. After 2013, the increase will be based only on the growth in inflation.

The government will also implement measures intended to ensure the long-term financial stability of the Bulgarian pension system and to improve the adequacy of pensions. One of the measures is an increase in the weight of one-year’s service from 1.1 to 1.2, although this increase will only apply to new pensions, because a 2010 agreement with the unions included a uniform rate for all.

Trade union proposals

Trade unions believe the best way to improve the pension system is to increase its revenues by improving the collection of contributions, rather by reducing expenditure. They suggest eight measures:

  • Making the concealment of contributions a criminal offence, and changing the Criminal Procedure Code accordingly;
  • Giving new powers to the National Revenue Agency to increase the level and effectiveness of control;
  • Repealing all legislative texts in the SSC that allow any paid-for service to be exempt from social security contributions;
  • Introducing compulsory payment of wages by bank transfer;
  • Restricting cash payments and making commercial trade non-cash only;
  • Eliminating benefits, and equalising the social insurance and retirement conditions of employees in specific public sector departments (the Ministry of Interior, the Ministry of Defence and the courts);
  • Introducing an effective labour inspectorate and limiting disability pension abuses, with occupational expertise to be provided by the National Social Security Institute;
  • Transfering non-insurable payments – such as social welfare payments and allowances – from all pensions systems to the Social Aid System from 2012.

Government and employers’ reaction

Government and employers say they have found the trade union proposals acceptable and useful, but they have not stopped cutting expenditure. Employers say pension reforms are part of emergency measures the government must take, no matter how painful for society. They believe the changes are necessary in the light of negative demographic processes and the deepening economic crisis.

Commentary

During the first reforms of the pension system in 2000 it was decided that retirement age would be increased from 60 to 63 for men, and from 55 to 60 for women. Now the focus is on a financially stable pension system because of its increasing deficit. Taxpayers finance 60% of the cost of pensions.

Trade unions say that consecutive governments have decreased employers’ contribution rates to pensions by 15%. However, employers say the main reasons for the deficit are early retirement opportunities and the growing number and abuse of disability pensions. Both statements contain an element of truth, but such painful reforms should only be undertaken after extensive discussion and a social consensus.

After the protest, urgent negotiations between trade unions, MPs and government officials did not lead to a mutually acceptable option. After meeting leaders of CITUB and CL Podkrepa on December 9, Bulgarian President Georgi Parvanov imposed a veto on the Public Social Insurance Budget Bill for 2012. However, the majority of the Parliament voted against the veto.

Lyuben Tomev, ISTUR

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