WRITTEN QUESTION E-0695/03

by Juan Naranjo Escobar (PPE-DE) to the Commission

(10 March 2003)

Subject: Pensions in the EU and the open coordination method

For various EU Member States, the main weakness of the stability programme has been and continues to be the long-term viability of their public finances, because the risk of budgetary imbalances cannot be excluded due, above all, to increase future spending on public pensions.

Can the Commission explain how the open coordination method is being applied in the field of pensions?

Answer given by Mr Solbes Mira on behalf of the Commission

(3 April 2003)

The open method of co-ordination was established by the Lisbon European Council (June 2000) as a complementary instrument to the Treaty-based processes for achieving the new strategic goal that was defined for the Union at the Lisbon Council in 2000. This method is to be applied in

areas where no other Community process or policy instruments exist. It is not intended to replace existing instruments nor to change the responsibilities of policy makers at the European and national level. The approach aims at enhancing policy co-operation between Member States. A general basis for adapting measures designed to encourage co-operation between Member States is given in Article 137 of the Nice Treaty which states that the Community shall support and complement activities of Member States in certain fields, including the modernisation of social protection systems.

In the area of pensions, the open method of co-ordination was defined in the Joint report by the Social Protection Committee and the Economic Policy Committee to the Laeken European Council in December 2001. This report states that the aim of the open method of co-ordination is to help Member States to develop their own national strategies. Further, it states that it does not change the respective responsibilities of policy makers at the European and national level and that it takes its place alongside a range of well-functioning EU processes which, as part of their wider remit, deal with aspects of pension policies. The report lists these other processes, which include the Broad Economic Policy Guidelines and the Stability and Growth Pact. Regarding the modalities of the open method of co-ordination in the field of pensions, it involves agreeing broad common objectives for pension systems (which were defined as the adequacy, financial sustainability and the modernisation of pension systems), reporting on national strategies according to these objectives, periodic monitoring of the progress towards these objectives, and agreeing on indicators. There is no possibility to give recommendations to Member States within this process.

Unlike the open method of co-ordination, the economic policy co-ordination is Treaty-based. It is based on Article 99 of the EC Treaty. Stability/convergence programmes are based on the Stability and Growth Pact which is embedded in the secondary legislation based on Article 99(4) and 104(5) of the EC Treaty. Within the wider remits of the Broad Economic Policy Guidelines and the Stability and Growth Pact, these instruments also deal with pension policies, notably from the points of view of their implications for the long-term sustainability of public finances and the overall performance of Community economies. In particular, the Stockholm Council conclusions (March 2001) called for reviewing the long-term sustainability of public finances, including the expected strains caused by the demographic challenges ahead, in the context of the Stability/Convergence Programmes and within the framework of the Broad Economic Policy Guidelines. Thus, the budgetary impacts of ageing are examined in the context of the Stability and Growth Pact and the Broad Economic Policy Guidelines can give recommendations to Member States on reforming pension systems with the aim of making them sustainable in the long run and contributing to the overall sustainability of public finances.