ECONOMY

Progress on social security reform

The government’s possible adoption of a flexible arrangement for pensions, allowing the scaling of retirement ages from the 55th to the 65th year, may ultimately prove the catalyst for securing the consent of labor unions in the planned social security reform. Such an arrangement is considered acceptable not only to the General Confederation of Greek Workers (GSEE) and employers’ organizations, but also to ministers who will be involved in handling what is generally considered to be the hottest potato in the new, reshuffled government’s hands. Although the scaled extension of retirement ages, which would be combined with economic incentives in pensions, would not provide a definitive answer to the overriding concern of ensuring the long-term viability of the pension system, it is viewed as an initial but essential step toward addressing existing ills while eliminating abominations such as retirements under the age of 50. The supporters of the proposal argue that if it is combined with an extension of the trilateral system of financing pensions (state, labor and employers) in the form of guaranteed future inflows, it can provide the basis for consensus and remove a serious obstacle to another electoral victory for the ruling party. Observers believe that the government cannot sidestep the issue and is obliged to act in the near future, particularly after the uproar that its initial proposals, launched in the spring, caused before being withdrawn. Otherwise it will risk arousing the suspicion of voters that a strong performance in the municipal elections in a year’s time may be taken by the government as a license to impose harsh solutions. The issue is surely not just political. There are those, like the former Labor Minister Tassos Yiannitsis, who introduced the failed proposals, who seem to look favorably on the prospects of the Greek economy itself after the expiry in 2006 of the European-Union subsidized Third Community Support Framework investment plan – the goose laying the golden eggs, which is projected to contribute 4 percent to the country’s gross domestic product. For the time being, however, the new heads of the Labor, Social Security and Economy ministries place emphasis on improving the climate with GSEE and ADEDY, the civil servants’ union. New developments, such as Labor and Social Security Minister Dimitris Reppas’s initiative to visit GSEE with his deputies Rovertos Spyropoulos and Lefteris Tziolas just two days after assuming their new posts and overtures to GSEE by Economy Minister Nikos Christodoulakis, are reinvigorating the issue, giving pause to trade unionists. At any rate, the recent PASOK Party Congress has brought a relative calm among its affiliated trade unionists. Although their majority gave their support to Prime Minister Costas Simitis once again, this was not met with the expected recognition in the composition of the party’s Central Committee. Two of GSEE President Christos Polyzogopoulos’s closest aides, Giorgos Orfanos and Giorgos Panagopoulos, failed to muster the necessary support; and this is likely to have its eventual impact. The two were never considered ardent allies of the so-called modernizers’ wing of the party, led by the prime minister, and this should be a matter of some concern to Polyzogopoulos. In a related development yesterday, European Monetary Affairs Commissioner Pedro Solbes was cited by Reuters as saying that while reforms already made to pensions and early retirement schemes could help, more steps may be needed in some countries. He singled out Spain and Greece as the two expected to see the largest increases in spending on public pensions as a proportion of national output. The very big differences between member states as regards the budgetary impact of aging populations shows that the design of pensions systems matters, he said. Countries can learn valuable lessons from successful reforms elsewhere, and the EU has a key role to play in this regard.