By Christina Kopsini - Kathimerini

The LAFKA fund matter did not just highlight errors, political blunders and, possibly, quite a bit of cynicism on the government’s part. It is also indicative of how the government is attempting to finance the indebted social security system. And, not for the first time, it showed how postponing a radical reform of the social security system can only be harmful.

The LAFKA fund, financed between 1992 and 2004 by imposing an extra tax on pensioners (4 to 80 euros per month for pensioners earning from 400 to 2,150 euros per month), is just an extreme side effect of the ineffectiveness of the Greek social security system. A system that is “social” in name only, since, through a series of hidden income redistributions, it leads to great disparities, both in income and in benefits. The way LAFKA was used is typical: In 1998, for example, almost all the fund’s assets (22.5 billion drachmas or 66 million euros) were used to make up for the debts of the Professional Drivers’ Fund (TSA) to the Social Security Foundation (IKA) over the use of IKA’s clinics. We should note that TSA, which offers its members very low pensions, also benefits from a special tax on driving licenses.

In the case of LAFKA, as in the obligation by pension funds to invest their reserves in Treasury bonds, the insured are treated as the state’s most secure lenders.

The LAFKA fund, instituted by a previous conservative government in 1992, was initially set up for a period of five years. Its duration was twice extended by the Socialist government, to 2008. The fund was abolished by the current New Democracy government in July, after the State Audit Office had ruled its existence unconstitutional, as those that contributed to it did not directly benefit.

However, the solution offered by the current government was bound to lead to last week’s impasse, since it had chosen to make the return of contributions conditional on pensioners’ suing the state and winning their court cases.

Lost in the noise over how the case closest to winning pensioners their money back was aborted was the fact that the abolition of LAFKA has cut off some 120 million euros in aid to the social security system. The question is now whether the government will seriously consider alternative, and permanent, ways to finance social security.