The Politics of Pension in European Social Insurance Countries1

This paper analyzes national processes of pension reform in countries with systems of old-age provision largely following the Bismarckian type (Austria, France, Germany, Italy, Sweden). Operating on a defined benefit/pay-as-you-go basis and mainly financed out of wage-based social contributions pension systems in these countries are highly vulnerable to demographic and economic pressures. Therefore, pension reform has emerged as a major issue in these countries since the early 1990s. While we observe substantial similarities in the direction of reform, the degree of policy change varies considerably even among countries with similar legacies in pension policy. As a closer inspection of national decision making processes in pension policy shows, the political feasibility of pension reforms and the degree of adjustment in pension policy critically depends on the government's ability to orchestrate a reform consensus either with the parliamentary opposition or with the trade unions. Drawing on a game-theoretical framework the paper also tries to identify the conditions under which these actors are willing and capable of forging a “pension pact” with the government.