Social Security Systems in Bulgaria and Romania

The continuing development of the social security systems in Bulgaria and Romania will leave both countries in a tenuous position for EU accession scheduled for 2007, exacerbated by recent political instability.

Romania’s Prime Minister Calin Popescu Tariceanu recently resigned and then reneged on his decision. His centrist government has still to make sufficient progress according to EU officials.

Reforms have been undertaken which are aimed at reducing poverty and social exclusion, higher living standards for older people, to decrease the amount of claimants and to search for alternative sources of social security funding.

Traditionally Romania employed an austere system especially with unemployment benefit, a major example being the doubling of the total non-eligible unemployed to claim benefit payment which doubled between 1998 and 2003.

The evolution of social security in Romania has been guided by the principles of European Union legislation number 1408/71/ EEC on social security regulations on employed, self employed and on their family members moving within the European Community.

In respect of this, a legal framework consisting of three pillars has been constructed, the first pillar on mandatory public administered redistributive payments which include old age pensions, benefits for disability, maternity, sickness and a survivor’s benefit in case of bereavement.

Ensuring that all payments are in line with the European social security code and all of the rudimentary benefits which are offered, as like in all EU countries, are regulated.

The two remaining pillars, one for mandatory payments and one optional privately administered component, are currently under review for redefinition and improvement for the protection of supplementary pension funds.

Administrative competence will be further enhanced by the integration of the pension system into the national computer to eradicate voids in the legislative structure from cases which exceed national boundaries, aimed primarily at migrant workers and their family members.

Bulgaria is currently suffering with political instability following the
national socialist party’s inability to form a government from the recent election, the last administration introduced significant changes.

This included the introduction of a minimum insurance calculation based on groups of professions to be paid by employer and employees, and a fund for the guarantee of employees claims in case of employer insolvency.

There are restrictions on the amount that can be yielded on private pensions with law restricting investments to protect the insurer. The major investment possibilities are with a maximum 5% of real estate assets and 50% of securities, like bank accounts, leaving little room for manoeuvre.

Svetla Kostadinova, senior economist with the Bulgarian Institute of Market Economics, said: “There have been many changes in respect of becoming a member of the European Union, which include the introduction of the widening of the possibilities for the transfer of social insurance rights with the inclusion of the directive, like in Romania, of 1408 which allows social security rights for workers in the free movement area within the EU.”

She added: “There will also be the increase of the pension age and to even the payments between employer and employee to 50/50 by 2009.”

Although Bulgaria will have to sustain effort in its deregulation reforms to decrease unemployment which is currently twice that of the EU average level, the current rate of unemployment stands at 11% which is the lowest since 1998.

Further improvements will have to be made to the health system to continue the improvement of its social insurances. Emigration increased through the nineties and into this decade, with most working in low paid jobs or becoming ’welfare tourists’, relying on the host country to make insurance payments.

The returning labour have caused a public issue in using a system to which they did not contribute, there have been further complaints from those that can afford private healthcare whilst still being forced to pay into the state system.

The current system is very state bureaucratised and subsidised, whilst the belief that the increase of market influence and the incentive of service provision will improve the system was contradicted by the pre-electoral message, which projected that contributions will have to increase.

According to sources from the European Commission both nations have no major drawbacks which could scupper accession in the area of the framework of social protection programmes, though later membership in 2008 now remains a possibility.

Author can be contacted at petertaberner1976@hotmail.com

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