ECONOMY

Greece happy with reforms, says ‘no’ to other changes

Greece yesterday stuck to its guns on social security reforms passed last year despite coming under pressure from the European Union to implement more radical changes to the system. «There is no issue of us reopening the social security subject,» Economy and Finance Minister Nikos Christodoulakis stressed. Echoing concerns expressed by the European Commission early this month, EU finance ministers on Tuesday said Greece’s aging population could strain public finances in the future. Greek demographics are the most unfavorable in Europe, while unfunded pension liabilities are estimated at over 200 percent of GDP. The ministers urged the Greek government to implement a more ambitious strategy to deal with the long-term fiscal consequences resulting from an aging population. Greece should also open up the social security system to privately funded schemes. In its assessment of the Greek Stability and Growth Pact for 2002-2006 early this month, the Brussels-based executive arm said, «Further deep reforms are required without delay to the pension system in order to avoid an unsustainable increase in public spending for pensions.» A subsequent review of economic and structural reforms undertaken thus far also questioned the assumptions underpinning the reforms, suggesting that they «may have understated the medium-term problems.» An earlier report on EU social security systems was scathing in its criticism of the reforms. Expensive, complicated and the least effective among EU countries, it said state funding is expected to grow at a faster rate than in any other member state. Christodoulakis said social security reforms adopted last year for IKA, the largest private sector fund, are designed to ensure the viability of the system. Critics, however, said the parametric changes to the system would jack up the actuarial deficit instead of bringing it down as intended, due to generous benefits granted to pensioners, an unchanged retirement age and the convergence of private sector benefits to public sector level. A report by credit rating agency Standard & Poor’s last year suggested the rising number of pensioners is expected to increase the debt burden and deficit to 147 percent of GDP and 14 percent of GDP by 2040. Rating agencies have said an upgrade of Greece’s credit rating is dependent on its ability to resolve the social security issue. Christodoulakis said reforms targeted at other occupational funds will follow the same guidelines as those set for IKA. He did not specify a time frame for initiating talks on the changes. Trade union confederation GSEE yesterday called on the government to guarantee that the social security issue would not be opened up for discussion again.