ECONOMY

Pension reform may derail budget

pension-reform-may-derail-budget

The revenues of the new social security hyper-fund would be at risk of crumbling from the very first year of its operation on account of the flat social security contribution rate of 20 percent on all salary workers, farmers, freelancers and the self-employed. That would also affect the 2016 budget, which requires a further fiscal adjustment of 0.9 percent of gross domestic product.

The main backer of the new pension reform, Labor Minister Giorgos Katrougalos, conceded yesterday in Paris that “with the reform we are lightening the social security contributions of the large majority [of workers] who have low incomes and will have to offset that with contributions from those who have medium and high incomes.”

On the other hand, representatives of insured workers speak of a destructive hike in contributions that would lead to a mass exodus of workers from the pension system if not from the country altogether.

The ministry has already decided to set up a committee to find a solution within next week. Time is running out, as the technical experts of the country’s creditors are on their way to Athens and will begin negotiations with the government on Tuesday. Therefore the ministry will need to assess the cost of its interventions to the system so as to ensure a balance, at least as far as revenues are concerned.