Talks between the government and the representatives of its creditors ran into problems on Friday on the issue of how to deal with the deficit of social security funds in 2014. This resulted in the cancellation of the meeting between the creditors’ mission and the labor minister that had been scheduled for Friday.
The head of the European Commission inspectors in Athens, Matthias Mors, spoke with minister Yiannis Vroutsis on the phone and canceled the meeting, as Athens and its creditors remain at odds over how to handle the deficit created by a reduction in revenues and a 1.8-billion-euro drop in state funding.
This is the first time that major differences have arisen between the representatives of the Commission, the European Central Bank and the International Monetary Fund – known as the troika – and the Labor Ministry on the measures that constitute commitments to the creditors but cannot be implemented due to the social security system’s dire financial conditions and the continuing recession that is weighing heavily on the funds’ revenues.
The problems do not concern the current year, as ministry data show that funds are balanced and already have a surplus of 992 million euros. The main concern is for 2014, when the shortfall of 1.8 billion euros must be covered and the collection of old debts is likely to fetch far less than expected. The measure to have debts repaid in 48 installments appears to have failed as no more than 115 million euros has been collected to date this year against a target for 250 million.
The government is therefore proposing the payment of arrears to social security funds in 60 installments, but the troika refuses to accept any changes to the repayment plans.
“On this issue the troika is adamant,” a senior government official said.
There is also a major disagreement on the issue of withholding 0.2 percent of enterprises’ turnover in favor of the fund for the self-employed (OAEE), a measure that was originally agreed to be implemented for this year alone to fetch some 150 million euros. The government insists it will not implement it, and under the troika’s pressure for offsetting measures it cited “the broadening of the social security base.”
However, the troika is not convinced by such general assumptions and is insisting on the implementation of the measure, which has now been passed on to Alternate Finance Minister Christos Staikouras.
A third thorny issue is the government’s commitment to reduce social security contributions by 3.9 percent. This measure is deemed unrealistic as some 1 billion euros would have to be found elsewhere to offset it.