Tighter pension fund rules

Government bans risky investments in bond derivatives, calls deeper probe

As the government braces for the political fallout from a scandal involving a state pension fund paying an exorbitant amount for a bond, the Finance and Labor ministries yesterday announced tighter restrictions on investments from social security funds.

Finance Minister Giorgos Alogoskoufis said that pension funds will no longer be able to invest in bond derivatives after a Labor Ministry probe showed that the Civil Servants' Auxiliary Pension Fund (TEADY) had overpaid -5 million to purchase a state bond from a brokerage firm.

The head of TEADY, Agapios Simeoforidis, announced his resignation on Monday but the conservative government has been under pressure to show that it is determined to tackle the problem.

«Recognizing the weaknesses in the investment guidelines, the government has wanted for some time to proceed with changes in those guidelines,» Alogoskoufis said.

«The recent developments, however, have shown the problems are deeper and demand more immediate solutions,» he added.

The minister also said that an investigation of fund investments since 1998 will take place and promised a new commission to draw up investment reforms by the end of June.

Political commentators said they expect PASOK will try to capitalize on the scandal, which has shamed a government elected on an anti-corruption platform three years ago.

In parliamentary talks expected to be held on the economy tomorrow, it is thought that PASOK leader George Papandreou will again call for the resignation of Labor Minister Savvas Tsitouridis over the issue.

The government had continued to support Tsitouridis, the minister in charge of social security funds.