Cypriot Pension Quirk Ruled Unconstitutional

(CN) - Government workers in Cyprus who take other jobs elsewhere in the EU must receive the same pensions as those who enter the private sector but remain in Cyprus, the EU high court ruled Thursday.

The European Commission sued Cyprus for failing to fulfill EU obligations, claiming that the Mediterranean island nation placed civil servants who chose to leave for jobs elsewhere at a disadvantage by taking away their pensions

Under Cypriot law, government workers under the age of 45 who resign to take jobs elsewhere in the European Union or with the EU government get only a lump sum and lose all future pension rights. However, civil servants who enter the private sector but remain on Cyprus continue receiving their full government pensions.

The Cypriot government claimed changing its pension laws would put the balance of its social security system at risk, and that its scheme ensured stability for civil servants while also respecting the EU's principle of proportionality.

But on Thursday, the European Court of Justice ruled in favor of the commission, finding that the EU constitution prohibits member states from taking away or reducing pensions of people who have exercised their right to move to another member state.

Furthermore, the Luxembourg-based court said the Cypriot scheme made it less attractive for civil servants to exercise their constitutional freedom of movement - and might deter government workers from taking jobs in other member states, EU government institutions or international organizations if left to stand.

The high court did note, however, that EU law allows member states to restrict fundamental freedoms if the restrictions can be justified by economic need in the pursuit of a public-interest objective. Cyprus cannot do so given its economic prosperity is slightly above the EU average, the court said.

Cyprus' pension scheme took affect before it joined the European Union in 2004 and should have been repealed at that time. Not doing so infringed EU law, the court concluded.

Full text of the high court's ruling was not made available by press time.

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