Pensions and European Integration

Abstract

The position of pensions in European integration is complex. Some specific aspects of pension policy are exclusively under European Union (EU) competence as the Internal Market for labour, capital and services requires harmonization, while in social policy, including pensions, the EU Treaty explicitly excludes harmonization going beyond the requirements of the Internal Market and secures ‘the right of the member states to define the fundamental principles of their social security systems’ (Treaty on the Functioning of the European Union (TFEU), Article 137, 2 and 4).1 Competence is shared between the EU level and the member states in certain provisions on public finances. In Economic and Monetary Union (EMU), government deficit and debt fall under the Excessive Deficit Procedure (EDP), meaning that the Council of the EU (composed of the ministers of the member states) issues recommendations and obligations to a member state under the EDP (TFEU Article 126). As excessive deficit or a risk thereof may be caused by spending on public pensions, in such cases the EU has the competence to ask a member state to take measures on pensions. Yet, in these circumstances, even with shared competence, for both legal and practical reasons, the specified measures will be determined by the member state.