BALKANS: Serbia Wakes Up Late to Early Retirement

By Vesna Peric Zimonjic Reprint | | Print |

Vesna Peric Zimonjic

BELGRADE, Nov 17 2005 (IPS) - Several doctors and pension fund employees in a Serbian town have been arrested in recent weeks and charged with taking bribes for issuing false early retirement certificates.

“This is only the tip of the iceberg,” Aleksandar Milosevic, head of the pensions fund department told IPS. “We have only started with Smederevo (60 km east of Belgrade), but we believe there will be a lot of work for police and judiciary all over Serbia.”

Forging medical documentation carries a sentence of one to five years in prison, while corruption can bring up to 15 years. So far, about 500 cases of recommending early retirement on falsified documents have been discovered in Smederevo, from 2000 until this year.

The regular retirement age is 65 for men and 60 for women, provided they have worked for 40 and 35 years respectively. The police began to inquire into early retirement of people in their fifties, and even forties, following suspect transactions.

Back in 2002, a doctor from Smederevo exchanged some 890,000 German marks (almost half a million dollars) into the newly introduced Euros. According to Milosevic and a highly placed police source, the doctor was working at the local pension fund, and like thousands of other doctors, had a modest salary of about 300 dollars a month.

The Bureau for Investigation of Organised Crime, and the ministries of health, social care and work began an investigation.

“A move to check all early retirement documents began in 2002,” Milosevic said. “We found out, with amazement, that a third of pensioners were ‘invalids’ – 400,000. The investigators found out that one in three files looked suspicious. It was then that the broad search started, and resulted in the Smederevo cases first.”

The documents declaring grave illnesses came from certain psychiatrists and internists. The panels that approved early retirements based on these documents comprised the same teams of doctors.

The scandal has arisen in an environment where early pensions can be particularly appealing. Serbia, with a population of 7.5 million, has about 1.2 million pensioners and 1.6 million employed.

Since 2000 and the fall of regime of Slobodan Milosevic, the country has taken a painful transition path to a market economy. Layoffs with only symbolic reimbursement have become routine.

Earlier, in the nineties, the Serbian economy was devastated by wars and international sanctions, and finally by the North Atlantic Treaty Organisation (NATO) bombing in 1999.

One consequence of all this was an army of idle workers with only meagre support from a state pretending that the economy had not collapsed. At the same time, existing pension funds had disappeared due to the war and the hyperinflation that at one stage reached 300,000 percent.

A new system was introduced in this situation in which pensions are paid from taxes collected from the regular income of the employed. Real pension funds can still not be established due to the slow recovery of an unstable economy.

“For the army of the middle-aged, it was a problem to have any orientation when economic reforms were introduced after the fall of Milosevic’s regime,” sociologist Stjepan Gredelj told IPS. “But they obviously found a way for the state to take care of them, in cooperation with medical workers. However meagre, the pension comes regularly.”

The average pension in Serbia is less than 100 dollars. But the grey economy represents about 40 percent of economic activity, and provides support for millions of employed and unemployed. In this environment, a pension can provide some support, and early retirement the time and opportunity to work in the grey economy.

It has been known for years that early retirement papers could be obtained for a sum of 2,000 to 4,000 dollars.

“Now thousands fear they will have to give back what they obtained as pensions if proof leads to them having bribed the doctors,” an investigation bureau source told IPS.

The source said the investigation has spread to a number of towns, from Belgrade to Nis in the south and into the former copper industry centres Majdanpek and Bor in the southeast.

The growing force of ‘invalids’ who retired early forced parliament to adopt a new retirement law in 2003. The law provides for early retirement only in case of total incapacity to perform any job. The earlier law said such a pension could be obtained if a person could not perform the job he or she held.

International financial institutions such as the World Bank and the International Monetary Fund have asked Serbian authorities to reform further the pension system that is eating heavily into the state budget.

Under such pressure, the law was amended earlier this month to break the link between pensions and the inflation rate, causing havoc among pensioners.

Private pension funds are due to be introduced because according to economic projections the state will be unable to support the growing number of pensioners. That move has shocked many of the still young and employed.

“It’s hard to believe that anything financial will remain stable in the future,” said 33-year old Sasa Marjanovic who works for an international computer company in Belgrade. “After the experience of the 90s and of my parents, it’s hard to believe things will be stable when I retire.”