A group of Croatian economists and social science experts sent an open letter to the government in which they railed against the privatized second pillar of the pension system, saying it is "running headlong towards disaster" and urged the government to "address this issue, against the backdrop of a global crisis."

The letter was signed by five prominent experts who often appear in the media as analysts – Ljubo Jurcic, Drago Jakovcevic, Gojko Bezovan, Ivan Lovrinovic, and Zeljko Garaca. They said that the second pillar has “failed to meet its goal,” and that despite its underpreformance it is still allowed to exist, even though all other post-communist EU countries have either abandoned the system or chose not to introduce it in the first place.

The first pillar refers to the state-run pension fund, and the second pillar refers to the four so-called mandatory pension funds which are privately owned and run by major local banks. Both pillars get their revenue from legally mandated contributions, with every employed Croatian paying 15 percent of their gross salary towards the state fund and another 5 percent for one of the four privately-managed funds.

Bezovan, a law school professor from the University of Zagreb, told state news platform Hina that in 2018, the International Labour Organisation (ILO) had released a study about privatized pension systems in post-communist countries which concluded that “this experiment had failed.” Bezovan said that contributors in the second pillar “are losing their money and will continue to lose it.”

Hina did not explain the process behind Bezovan’s thinking, but quoted him as saying that “the failure of the privatization of the public pension system, in line with the World Bank’s models, had been hidden from the public eye for long time, since media outlets still depend on advertisements supported by the financial capital.”

Bezovan told Hina that the World Bank and the ILO are “now devising models with a different approach to the public pension system,” and that they have “abandoned the concept of privatization.”

Hina did not ask the World Bank or the ILO for comment.

“For instance, Poland and Hungary have abandoned the system and in Slovakia, those who pay contributions into the second pillar stay there at their own risk. Estonia left that model two years ago, while Slovenia and Czechia have never introduced that system,” according to the Bezovan.

Hina did not independently verify any of this.

The “findings of a study conducted by the five signatories,” Hina continued, are that the losses of mandatory pension funds this year “could be an estimated at 14 billion kuna (€1.8bn).” In addition, they added, the “13-percent inflation adversely impacted the funds’ assets” which is why they have “lost 16 billion kuna in value,” so according to these five men “the total loss actually reached about 30 billion kuna (€4bn) in comparison to the promised yield to members of those funds.”

Hina did not approach any of the four mandatory pension funds for comment.

The five men therefore urged the government “to deal with  the privatized pension system, in a way which would follow the example of other post-communist countries,” in the letter, which was disseminated by the local media.

(€1 = 7.54 kuna)