Primary surplus soaring despite pension fund deficit

The primary budget surplus in January-November 2014 was two-and-a-half times higher than a year earlier and the state has repaid a significant portion of its arrears to third parties, but the country’s social security funds are cash-strapped and showing a significant deficit, according to figures released on Thursday by the Finance Ministry.

In the first 11 months of the year the deficit of the pension funds grew to 741 million euros, forcing the funds to eat into their cash reserves due to the reduction in state financing and social security contributions. As a result, their cash reserves have shrunk to just 435 million euros, from 2.15 billion at end-November 2013, or a 79.8 percent drop.

Social security contributions declined by 2.9 percent on an annual basis, due to the 3.9 percent decrease in the rate of employer and employee contributions to the Social Security Foundation (IKA) since July 2014, high unemployment and the drop in salaries.

Nevertheless the general government budget recorded a primary surplus of 3.7 billion euros against 1.5 billion euros in the first 11 months of 2013. This can be explained by the course of the government budget, which has shown a primary surplus of 1.8 billion euros against a primary deficit of 2.7 billion euros a year earlier. Notably, the state borrowed some 7.3 billion euros in the form of short-term loans (repos) from general government entities at the end of November.

State debts to its suppliers and taxpayers dropped to 4.5 billion euros at the end of November, from 5 billion at end-October. This decline was due to the repayment of dues to state suppliers, as the balance of outstanding tax rebates posted an increase in November: General Accounting Office data showed that arrears to suppliers fell to 3.8 billion euros from 4.3 billion in October and from 4.2 billion at the start of last year. The tax rebates that were still pending at end-November grew to 731 million euros, from 718 million a month earlier.