Generous Pensions Toppling Hungarian Economy

Public spending dilemma threatens to engulf Eastern Europe
By Rob Quinn,  Newser Staff
Posted Mar 25, 2009 4:56 AM CDT
Generous Pensions Toppling Hungarian Economy
Hungarian firefighters march while carrying a coffin during a public employee demonstration in downtown Budapest, Hungary, last year.   (AP Photo/Bela Szandelszky)

Pensions are at the heart of the Hungarian financial crisis threatening to drag down the Eastern European economy, the Wall Street Journal reports. Three out of every 10 Hungarians currently collects a generous government pension, but the cost—around 10% of GDP and rising—has made the country's deficit unmanageable, bringing it to the brink of a collapse that could shatter investors' confidence in the entire region.

Hungary's prime minister stepped down in a row over spending cuts this week, and while cutting benefits would be political suicide for any successor, critics say the country has little choice. "They put a lot of money into the hat to give to people," said one pensioner. "But now, if you don't have any money in the hat, it doesn't matter who is prime minister." (More Hungary stories.)

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