ECONOMY

Garganas suggests lifting retirement age as solution

The Bank of Greece yesterday urged Greeks to consider a higher retirement age as a solution to the country’s worsening demographics and the inadequacies of social security reforms undertaken last year. «We need to complete social security reforms, change some of the perimeters. Greeks need to work longer,» said Nicholas Garganas, governor, presenting the central bank’s annual report. His comments echoed critics who maintained the changes adopted last year were merely stopgap measures and that further reforms would be needed further down the road. Foot-dragging would only lead to a bigger and unsustainable tax burden for future generations, he warned. Last year, Greece overhauled the debt-burdened social security system with a new refinancing plan but left untouched the retirement age and retirement benefits. Garganas’s proposals immediately sparked off criticism from GSEE, the trade union federation. «Raising the retirement age is not an issue now nor in the future,» the federation stated in uncompromising language yesterday. Trade unionists have consistently maintained that the ills of the system stemmed from mismanagement rather than the retirement ceiling. The social security system aside, Greece needs to step up the pace of structural reforms, Garganas said, singling out the taxation system, the electricity and natural gas industries and the labor market as areas in need of improvement and deregulation. Greece should do more to integrate migrants into the work force and society, he said. Garganas said the high unemployment rate, the second highest in the EU, continues to be a major problem even though it has been on the decline for the last three years. The widening current account deficit, still hovering above 6 percent of GDP for the third consecutive year last year, is another challenge while above-average inflation could erode Greece’s competitiveness and slow economic growth, he warned. Garganas also said it is crucial Greece continues its privatization program in order to improve the effectiveness of state-owned companies. The central bank governor was equally scathing about Greece’s mountain of debt. At 105.8 percent of GDP, Greece was the second most indebted country in the eurozone last year. The government is planning to trim public debt by an average of 5 percent annually over the next four years. «Greece has profited substantially from membership of the eurozone but the benefits are tied to structural reforms, a strong economy and the ability to adapt to the new competitive conditions in the region,» Garganas said. He deems it vital that Greece create favorable conditions for growth now before EU funds start tapering off in 2006.