Pension Reforms in Central and Eastern Europe: Yet Another Transition...?

The pay-as-you-go (PAYG) pension schemes in Central and Eastern Europe are on the verge of financial collapse. In this paper, we analyse the causes of the crisis in the old-age income insurance systems and we discuss theoretical and political economy aspects of pensions and retirement behaviour. Piecemeal reforms have created additional distortions in the pension system and deepened its financial crisis. We will discuss proposals for reforms that combine short run policies for adjusting the existing PAYG system and guaranteeing its financial viability with long run policies to phase in a multi-tiered system combining elements of PAYG and fully funded schemes.