Many in this Balkan state see a risky raid on their old-age savings as the only way to get by as inflation and unemployment take their toll.

Despite the high temperatures that gripped Kosovo last summer, in mid-July people could be seen at busy spots in several cities, clutching petition sheets and inviting passers-by to sign. With a week, they collected more than 20,000 signatures.

A month earlier, demonstrators demanded that lawmakers pass a law with the same aim as the petition: to allow Kosovans to withdraw up to 30% of the funds saved in a state pension fund known as the Trust, to help cover the rising cost of energy, food, and other essentials.

In the end, although the bill, initiated by the opposition Democratic Party of Kosovo (PDK), failed to pass, the petition drive gathered enough signatures to send a similar bill back to parliament, where it may be debated in the coming days or weeks.

The whole idea of withdrawing individual old age savings has its roots in 2020 when the economic situation was aggravated by the COVID-19 pandemic. At that time, the former government approved an economic recovery package, which, among other measures, provided for the amendment of the pension fund law, allowing the withdrawal of up to 10% of the amount workers had accumulated under a mandatory old-age savings program, the so-called second pillar of the pension system.

Kosovo war veterans demanded higher pensions at a demonstration outside the parliament building in Pristina last June. Photo by Florion Goga via CTK/Reuters.

Taking It to the Streets

Kosovo is experiencing historically high inflation with prices rising 13% in the year ending in September, in consequence initially of disruptions in the global supply chain during the pandemic, aggravated since February by Russia’s invasion of Ukraine.

The rising inflation mirrors global trends, but it affects Kosovo more than many countries because of the country’s heavy dependence on imports. Kosovo imports more than half of the goods it consumes. The cost of basic foods such as bread, oil, eggs, and meat rose by a quarter to a half this year. All this made it more difficult for an average household.

Last winter, Adnan Jashari, a 27-year-old history graduate who works as a telephone operator for a bank, began gathering support for the 30% withdrawal initiative on a Facebook group which now claims more than 28,000 members.

Jashari, whose group organized the protests last summer, says the idea is gaining strength because average Kosovans see no alternatives.

Wages have not gone up despite calls for raises from the major unions, he says.

“Suspending VAT for basic products and lifting the excise duty on oil for a few months would ease the crisis we are in. The reason citizens support the withdrawal of their savings is because there are no measures being taken,” he said.

Few Jobs, Low Pay

Kosovo is one of the poorest countries in the Balkans and in the whole of Europe. In the last survey in 2017, results indicated that about 23% of the population lived in poverty or extreme poverty.

High unemployment compounds the problem. About 25% of the working population is unemployed, with the 15-24 and 25-34 age groups most likely to be jobless.

But things are little better even for those with jobs. In 2021, average gross salaries were 612 euros (public sector) and 419 euros (private sector).

Soon after the economic damage from the Russian invasion of Ukraine began to bite, several PDK parliamentarians drafted a bill on the withdrawal of old age savings, only to meet strong opposition from the government. The bill then went directly to the legislators in late spring. During parliamentary debate on the bill, Jashari and dozens of protesters, some of them parliamentarians from the opposition, gathered outside the government headquarters and the parliament, waving placards that read “The crisis is today! Vote for the Trust,” “We want our money,” and “The Trust belongs to the citizens, not to the rulers.”

Bekim Haxhiu, a PDK deputy and one of the bill’s drafters, told Transitions the economic crisis Kosovans are living through means that tough decisions must be taken.

“The initiative for the withdrawal of savings came as a result of the government’s inaction in the face of the economic crisis and inflation,” he said, adding that the bill has no implications for the state budget and will actually give the economy a boost.

The bill failed to gain approval when it came up for a vote in June, as the parliamentary majority was against it. The government kept up its attacks on the bill, with Prime Minister Albin Kurti insisting that a second withdrawal would destroy the institution of the Trust and would not benefit the poorest. The International Monetary Fund had argued similarly.

According to Haxhiu, the funds in the Trust have lost value on securities markets.

“It is far more just to allow citizens to withdraw up to 30% of their [old age] savings, than to have the Trust’s money lost on international markets,” he Haxhiu. “We expect support [from parliament] for the citizens’ request in this enormous deepening of the crisis.”

Small Savings, Small Pensions

Kosovo’s pension system rests on three pillars: A basic monthly pension of 100 euros paid to all citizens when they turn 65; mandatory savings for all employed people; and a third, voluntary pillar.

The funds saved under the second pillar – which people would be able to tap if the bill becomes law – are invested on international markets with the aim of increasing their value. The average worker has contributed 5,400 euros to the Trust, according to a report by the Pristina-based GAP Institute think tank.

Critics of the scheme say those who tap into the fund prematurely will have much less money to add to their basic pension of 100 euros when they reach retirement age.

But supporters of the initiative are not worried about this. Rising austerity has made meeting monthly expenses impossible for many and they need help now, they argue.

“Those who live poorly today will live even worse when they retire,” Jashari said.

Even if this bill were to pass, the amount they would be able to withdraw is small. There are 694,000 contributors in the Trust and according to the GAP Institute, over 90% of them have less than 10,000 euros saved and thus will be able to withdraw up to the limit of 30% of their savings. But half of the contributors have less than1,000 euros saved.

Meanwhile, unlike the first withdrawal of 2020, the draft law that failed to gain approval last summer did not provide for the reimbursement of funds withdrawn.

Around 427,000 workers took the opportunity to tap into the Trust in 2020. The government has pledged to make good its pledge to refund the withdrawn funds of those who had less than 10,000 euros saved, starting in 2023.

This time around, opposition parties are closely connected with the demand for another round of withdrawals, and have heard the governing parties accuse them of pushing this harmful idea to gain political points.

A Few Euros More

The current government, in power since early 2021, has enacted several measures to help Kosovans deal with ever-higher prices of essentials, although for critics, these steps are too small to make a real impact. In October 2021, an ad-hoc measure allocated an extra 100 euros to retirees for one month, and doubled the payments to the 26,000 households who took part in the state poverty-reduction scheme for two months.

In March, the government targeted a wider beneficiary group by allocating an extra 100 euros to all private and public sector workers with a monthly salary of 1,000 euros or less and to students and retired people.

This measure again included a double payment to beneficiaries of the welfare program, this time just for the month of April. The measure was widely criticized as a one-off that handed out the same payment to those with good salaries (by local standards) and minimum-wage earners alike.

The official slogan of the DokuFest International Documentary and Short Film Festival held in August in Prizren, Kosovo, fits the overall mood of the country in these difficult times. Image via WeBalkans EU/Flickr.

A third package announced in September as a cushion against inflation included similar benefits. From October to the end of 2022, the state will add an additional 50 euros to the pay of public servants; employees of public enterprises and retirees are to receive a one-time payment of 100 euros, and welfare recipients will again get a one-time double payment.

This package also ran into opposition, mainly from private-sector workers who complained they were not offered the same temporary raise. Some will receive up to an additional 100 euros for three months, though, if their employers raise wages – by how much is not specified.

The government also pledged to subsidize electricity bills for consumers who can show they are cutting back their energy consumption.

Finally, the minimum wage, which has not changed for 11 years, was increased from 130-170 euros to 264 euros. But even this increase awaits approval by lawmakers.

Adnan Jashari, although he remains optimistic that the draft law initiated by the citizens themselves will be approved, says that if this does not happen, the situation may escalate in the fall, when it is predicted that the energy crisis will become even more serious.

The bill is expected to meet strong opposition from the ruling Vetevendosje party and its partners when it comes up for a vote in parliament.

Still, Jashari insists that when parliament considers the new bill, a majority of deputies will treat it positively as, he says, this time it comes directly from the citizens.

For Jashari, who says that this is his first political engagement, leading this initiative has taught him a useful lesson, whatever the final result may be.

Ordinary people have now learned that they can make demands of elected representatives at any time in the electoral cycle, not just when voting.

“Citizens can change policies and can be a very important factor in social life. Until now, we were used to voters being factors only on election day,” he says.

Gentiana Pacarizi is the managing editor of Kosovo 2.0. She reports on politics, energy, and the economy, and is active on behalf of media independence and information literacy.