IPE 360: Financial literacy can lower political cost of pension reform

first_imgA good pension reform was one that triggered changes in behaviour to ensure that it lived on in society, according to Fornero.One of the reasons that reform was so difficult was because it had to involve reducing benefits for some and giving or reducing the burden on other generations, she said.“Don’t believe when they tell you that they’re doing a pension reform where nobody has to pay a price,” she told delegates. “It’s simply something that does not exist in nature.”Fornero said it was important to narrow the gap between the technical and the popular view of pension reforms. She did not like the view expressed by Jean-Claude Juncker, who once said: “We all know what to do, we just don’t know how to get re-elected after we’ve done it.” She and a fellow academic at the University of Turin, Anna Lo Prete, carried out research to test whether this view was empirically justified, and whether the political cost was reduced when people better understand the reform.She said the research, which analysed 20 years of pension reform in different countries, showed that implementing change reduced the chances of a government being re-elected, but that in countries with higher “economic financial” literacy, governments were penalised much less.“This is good news,” said Fornero. “We need to work on financial literacy programmes exactly because we need to involve people in social change.”Harking back to the situation in Italy around the time of the pension and labour market reform she introduced, Fornero said the political parties approved the reform but then attacked them in a bid to rebuild their reputation.“It was of course natural for them to say our work was so bad, which is exactly the opposite of the message that should have been given,” she said.The message should have been that the reform was done for the benefit of the country, and not for any single party, trade union, or interested parties, she said.“It’s difficult but it was worthwhile,” she said. “And the reform is still there.” Financial literacy can help reduce the electoral cost of pension reform, according to research carried out by economics professor and former Italian labour minister Elsa Fornero and a fellow academic.Fornero, who is professor of economics at University of Turin, was the labour minister in Mario Monti’s technocratic government from 2011 to 2013. She introduced a pension reform that helped save Italy from financial collapse, although it was seen by many as amounting to austerity.Speaking at the IPE 360 conference at the London Stock Exchange yesterday, Fornero said public pension systems were full of political risk, as it was easy for politicians to make big promises given that they have a short-term horizon but pensions are long-term.Today that short-term horizon favoured the older generation, she said.last_img read more

AVB offers advice to Townsend

first_imgAndre Villas-Boas has told Andros Townsend to continue working hard so he avoids the same off-the-field problems Jack Wilshere has encountered recently. Townsend became the most talked about player in English football last week when he made a stunning international debut against Montenegro. The 22-year-old followed that performance up with another impressive display versus Poland, and if he maintains his good form, it would be practically unthinkable for the winger not to make Roy Hodsgon’s World Cup squad. Spurs lacked width last season when Aaron Lennon was out through injury, but Townsend’s superb form has meant the north London club have coped easily without the former Leeds man, who has not played since the opening day of the season. Lennon has recovered from the foot injury he has been suffering from and is available for Sunday’s game at Aston Villa. Lennon has been Tottenham’s first-choice on the right flank for the last few years, but Villas-Boas thinks the 26-year-old knows he will not expect to walk straight back into the starting XI. “People understand that you have to fight for your place,” Villas-Boas said. “Sometimes you don’t always have to speak to the players. They are intelligent and understand that.” From now on, his life will never be the same again. His every move both on the pitch and in his private life will come under the microscope. Wilshere remains one of England’s brightest talents, but has had a rough time of late. After being pictured smoking outside a nightclub, the Arsenal midfielder then caused controversy with his comments over national eligibility. The fact that he also made headlines for appearing to urinate against a bush during an open training session shows how much scrutiny England players are under these days and Villas-Boas knows it. “Obviously when you get public and media recognition you have to tolerate it,” the Tottenham manager said. “He (Townsend) has to step up his game. I suppose Jack Wilshere falls into that category. “He is a great product of English football. Sometimes they are chased, sometimes a victim and sometimes guilty. “But at these moments you have to stay strong with your personality and continue to perform for club and country.” Townsend on Friday completed an eventful week by signing a new four-year contract with the White Hart Lane club. Press Associationlast_img read more