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Thursday, Mar 29, 2012 3:00 PM UTC

Poland’s ruling parties agree on pension reform

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Poland's ruling parties agree on pension reformPoland’s Prime Minister Donald Tusk, right, and Deputy Prime Minister Waldemar Pawlak announce a compromise on how to overhaul the pension system, in Warsaw, Poland, on Thursday, March 29, 2012. Tusk, with the pro-market Civic Platform party, wants to raise the retirement age to 67 for all Poles from 60 for women and 65 for men to help bring down state spending. Pawlak’s more welfare-oriented Polish Peoples’ Party felt that was too harsh and managed to water the plan down somewhat. The dispute had led to questions about whether the coalition would survive. (AP Photo/Czarek Sokolowski)(Credit: Czarek Sokolowski)

WARSAW, Poland (AP) — Poland’s two governing parties agreed Thursday on a plan to raise the full retirement age to 67, though the pro-market prime minister had to accept a watering down of his ambitious pension overhaul to placate his junior partner.

Polish law currently allows women to retire at age 60 and men at age 65. Prime Minister Donald Tusk and his Civic Platform party want to raise the retirement age to 67 for all Poles to reduce state spending and tackle government debt.

Those intentions have proven unpopular and even caused a rift in his coalition with the Polish Peoples’ Party, which supports greater welfare spending by the state. Many people in this ex-communist country are accustomed to a system in which people retire relatively early, with people in some professions retiring in their 50s.

The idea that people in coming years will have to work until age 67 strikes many as a hardship.

Under the compromise announced Thursday Poles will not be able to retire fully until 67. However, women could start drawing partial retirement payments at 62 and men at 65 if they continue to work part-time. The catch is that once they reach full retirement at 67 their full pensions would be lower.

Tusk said the deal doesn’t compromise his goal of raising the retirement age, and argued that the change is needed because Poles are living longer. Another reason he has pushed for the changes is a predicted shrinking of the working-age population in coming years given Poland’s low birth rates.

“Increasing the retirement age to 67 years remains the goal of the reform,” Tusk said at a news conference alongside Waldemar Pawlak, his deputy prime minister and the head of the Polish Peoples’ Party.

The plans still face a vote in parliament and need the approval of President Bronislaw Komorowski. If approved, the reforms will be phased in gradually over the coming decades.

After Civic Platform won a second term last fall, Tusk made pension overhaul and other austerity measures key priorities. He has said he doesn’t plan to run again after this term ends in 2015, and has acknowledged that the reforms will be hard and will hurt his popularity.

The pension overhaul plans have prompted street protests in recent weeks. Some of the most vocal opponents have been trade unions and the opposition Law and Justice party, which supports a greater degree of welfare spending by the state, especially for the poor and vulnerable.

Piotr Duda, head of the Solidarity trade union, called the government agreement a “fraud and a rotten compromise.” He said 50,000 union members plan to rally Friday in front of parliament to protest the pension reform and call for a referendum on it.

Poland is an ex-communist country whose economy has boomed since joining the European Union in 2004. Yet it still faces serious problems, including joblessness of around 13 percent.

Its deficit is smaller than that of many Western European countries, but Poland still faces pressure by markets and the EU to keep it in check.

More Vanessa Gera.

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