BUDAPEST -- The popularity of the new private pension funds is causing an unexpected fallout for the Hungarian goverment-run, pay-as-you-go system because more money is being diverted into the new plans than projected.
Experts had thought the state system would break even this year, but now it is estimated to have a shortfall of 20 billion forints ($94.7 million). The government has pledged to cover the deficit.
The deficit is a tremendous source of tension between the Finance Ministry and the Self-Governing Authority for Pension Insurance Hungary, a quasi-government agency that runs the state system.
When the Hungarian industry was privatized after the collapse of Communism, the authority received assets -- mostly shares in state-owned companies that since have been privatized -- now estimated to be worth 80 billion forints ($379 million).
The Finance Ministry believes the authority should be required to sell more assets to cover the deficit. Under law, the authority must sell 11 billion forints of its assets this year, but vows to sell no more. "We were given those assets to manage, not to sell," said Ilona Szeremi, the authority's president.