Decent Pension VS Balanced Budget: The Russian Solution to the Dilemma

According to the internationally accepted practice, it is impossible to solve two problems simultaneously, i.e. both to balance the long term federal budget and to maintain the level of living standards for people after their retirement. The recent substantiating examples are the failures of the attempt to implement ambitious pension programs in Ukraine and in Greece, in particular. It is common for populist governments to adopt generous pension schemes under the influence of suddenly increased budget revenues (for example, due to promising changes in the global market). This can also result from the possibility to get low-interest credits at the global financial markets. The problem arises when the sources of pension funding appear to have been temporary. At this point, it is necessary to choose between the two harsh alternatives. The first option is a balanced budget, but tough and painful for the population pension reform implementation. The second variant is generous funding of pensions in the current period followed by a devastating level of hyperinflation in the future. The “budget vs pension” dilemma reinforces the fact that no one can overcome the dynamic budget