Pension System Reforms As A Prerequisite For Increasing The Competitiveness Of Eu Member States

Competitiveness has occupied economists’ attention for decades and there is always a viewpoint that requires deeper examination. Competitiveness means the ability of a country or company to sell its products and services on the world market without losing a market share. A country is competitive when it generates a growing income which increases the living standards of its citizens. Products that the world market will buy more than others are either more affordable due to lower price or superior in quality. Therefore, price competitiveness is primarily in the segment of labor and resource-intensive product. While quality competitiveness is crucial for technology-intensive products, the level of pension contribution rates can have a significant impact on the final price of products, regardless of what type of competitiveness we consider. Conversely, a lower contribution rate results in insufficient revenue of the pension system and the generation of budget deficits, and thus a reduction in competitiveness from a macroeconomic point of view. EU member states face continuous and robust growth in pension expenditures because of unfavorable demographic trends - population aging and migration, but also inadequate growth in pension revenues due to low employment. To mitigate the effects of aging and cope better with the increased costs of pension insurance, countries are implementing various pension reforms, which in turn affect both the economic system and its competitiveness. The paper examines the impact of fiscal policy variables on the level of competitiveness of EU member states, with special reference to variables relevant to the pension system to establish the need of pension reforms for raising the level of competitiveness.