Minister Rostowski; photo - east news; below, the minister takes on his critic - photo - PAP

Finance minister Jacek Rostowski took on one of his fiercest critics, the economist Leszek Balcerowicz in a televised debate last night on the controversial changes to the pension system - part of the government’s plan to cut public debt.

The debate – in prime time at 8.20 p.m., right after the main evening news – was broadcast live by the TVP public broadcaster.

In a poll taken by Homo Homini and commissioned by Polish Radio, 51 percent. Of respondents felt that the arguments put forward by Balcerowicz were the more convincing, while 37.2 percent felt that Jacek Rostowski emerged the winner.

Poland’s pension contributions are paid into two different funds - to the state company ZUS and to a private pension fund which can be chosen by the premium payer.

The government intends to cut contributions put into the private pension funds - the so-called ‘second pillar’ or Open Pension Funds (OFE) - from 7.3 percent down to 2.3 percent.

The money saved will remain in the hands of the state owned ZUS social insurance company and will be paid into special individual accounts, which can be inherited.

The government wants the changes to come into force on 1 May.

Finance Minister Rostowski said the contributions would gradually be reintroduced to OFE to 3.5 percent by 2017.

But the government has been criticised by liberal economists such as Leszek Balcerowicz - the architect of the ‘shock therapy’ reforms following the collapse of communism - as playing fast and loose with Poles’ future pensions in an attempt to sidestep possibly painful public sector cuts in the short and medium term, during a year which will see the government seeking re-election later this year.

Avoiding painful cuts

Professor Leszek Balcerowicz, who was vice-prime minister in the government which implemented the pension system reform in 1999 whuch created the OFE system, says that it is false to argue that contributions to OFE are the main cause of the increase in the public debt.

He maintains that the cost of bureaucracy on the government’s watch increase between 2008 and 2010 by eight times - something which should be a travesty to a government which claims want to cut back red tape and the size of the state.

Balcerowicz argued last night that spending on bureaucracy, communist-era pension privileges for miners, the lack of reform of the Agricultural Social Insurance Fund are all reasons for the rise in public debt which the government refuses to face up to.

“Why does the government not look at the much higher expenditure spent on public administration, including the bureaucracy, which has risen significantly in recent years,” Balcerowicz said.

Poland‘s public debt has reached nearly eight percent of GDP - far higher than EU rules which stpilate that a nation can only join the euro zone and later adopt the single currency with debt levels below three percent.

A wide range of the economists have said that the government‘s plan to cut debt levels to the required rate by next year and not credible and even Prime Minister Donald Tusk has said that 2013 is probably a more realistic target. (pg/kk)