UPDATE 1-Poland may shift pension funds' bonds to state-paper

* Funds' $39 bln in bonds may be cancelled-newspaper

* Government would take on pension liabilities

* Finance minister says it is "sheer speculation"

WARSAW, April 3 (Reuters) - Poland is considering cancelling $39 billion in treasury bonds held by private pension funds and paying the resulting pension shortfall out of its own budget, a newspaper said on Wednesday.

Such a move would reduce the stock of public debt and ease immediate spending pressures, as the government would save on paying interest on the bonds and most of the pension payments are not due for years, according to Gazeta Wyborcza.

Poland's public debt stood at about 55.6 percent of GDP in 2012 and private pension funds, known as open pension funds (OFE), hold 126 billion zlotys ($38.6 billion) of treasury bonds equivalent to 8 percent of 2012 GDP, out of their total net assets of 269 billion zlotys ($84 billion).

Any transfer of the funds' liabilities to the state would raise parallels with Hungary, which effectively nationalised its private pension system in 2011. Poland introduced a private pension system in 1999 as part of a free-market liberalisation of central Europe's largest economy.

The head of the Polish Chamber of Pension Funds, Wojciech Nagel, said last month funds were frightened the government would tap their assets, and that this could hit the stock exchange and the economy at large.

Administrators include Aviva and ING.

An unnamed government member told Gazeta Wyborcza the cabinet, which is due to reveal results of a pension system review in May, is also looking at cutting the share of wages paid to funds and restricting them to investing only in shares.

For 14 years, Poland has had a hybrid pension system: a purely state-run pay-as-you-go component alongside state-guaranteed private funds.

"SHEER SPECULATION"

Finance Minister Jacek Rostowski told broadcaster TVN24 that Gazeta Wyborcza's article was "sheer speculation".

Earlier this week Prime Minister Donald Tusk said that while he did not believe that private pension funds should "be liquidated", nor should they be "preserved at any cost."

Hungary's actions were criticised by the European Union and rating agencies as a short-term fix to public finances that would be harmful in the longer-term.

Poland has made a big effort to improve its public finances, with the European Commission forecasting its structural fiscal deficit should fall to 1.7 percent of gross domestic product in 2014 from 8.3 percent in 2010.

Also in Poland's favour is that, since its 1999 reform, pensions depend on workers' contributions rather than the previous, communist-era system of fixed payments for retirees, which economists said was unsustainable.

The government wants to cut its deficit to around 3 percent of GDP from an expected 3.5 percent last year. Faced with a shortfall of tax revenue due to the economic slowdown, it is looking for ways to cut expenditure without hitting growth.

Gazeta Wyborcza added funds' share holdings, currently about 101 billion zlotys or 20 percent of local stock market capitalisation, would be left intact.

Poland has already cut pension contributions in 2011 to 2.3 percent of gross wages from 7.3 percent. This year transfers rose to 2.8 percent of wages.

In March, media reported the finance ministry made a proposal within the cabinet to shift assets of people due to retire within 10 years to the public pension fund ZUS.