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The Politics of Pension Liabilities in Government Debt Statistics

European Union
Governance
Welfare State
Jessica de Vlieger
University of Amsterdam
Jessica de Vlieger
University of Amsterdam

Abstract

This article explains how decisions are made concerning the definition and measurement of fiscal indicators in the European Union. It focuses on one particular controversial issue: the recording and measurement of pension liabilities in government debt figures. Fiscal indicators play a powerful role in the governance framework of the European Union. Eurozone countries are required to keep their public deficit and debt below 3% and 60% of GDP, respectively. Meeting these fiscal rules can compel countries to take measures such as cutting public expenditures, which can have far-reaching distributional effects. It is far from self-evident, however, how we should measure fiscal indicators. When calculating government debt, not all government liabilities are included in the figure. One of the most prominent omissions is unfunded public pension liabilities. Due to developments as population ageing, attention for the consequences of pension schemes on fiscal sustainability has grown. However, the statistical treatment of unfunded pension schemes has been very controversial and revealed differing opinions between countries. Despite many debates on the international and European level, pension liabilities remain out of headline fiscal statistics and many European countries have not been very willing to submit data on the size of their pension debt. This paper will look at why the treatment of pension liabilities has proven so controversial. Is this driven by individual member state interests or do independent statisticians prevail? What motivates their decisions and choices? Based on archival material and extensive interviews, this paper reveals how and why the EU settled and agreed on the recording of pension liabilities in government debt figures.