State jeopardizing EFKA’s future by not paying its dues in full
The state is fast becoming one of the biggest debtors of the new Single Social Security Entity (EFKA), with the fund starting its first year of operation in 2017 with significant arrears.
While millions of salaried workers and pensioners are expected in 2017 to shoulder the burden of 3.3 billion euros in new taxes, social security contribution hikes as well as cuts to salaries and pensions – stemming from the draft budget for next year – the state, which is the employer of hundreds of thousands of civil servants, has not been paying the entire amount of contributions due, thus depriving the system of revenues coming to at least 1 billion euros.
The mounting debt means that EFKA has from its outset been transformed into a castle made of sand, with a future that is, to say the least, uncertain. This expected collapse of revenues is reflected in the new fund’s budget plan, as it adds up the existing pension funds’ deficits to show a black hole of 2.9 billion euros. That hole is anticipated to be reduced to a far from negligible 1.12 billion euros following a still unspecified cash injection of 1.7 billion euros.
Meanwhile, the alarm bells are also ringing in regards to the procedures for the administrative and pension-paying unification of the social security system. Additionally, an increasing number of voices – including from Irish consultancy firm NI-CO (Northern Ireland Co-operation Overseas Ltd) that has undertaken the project of the formation of the new single entity – warn about a delay of at least six months in the creation of the new social security structure.
This structure constitutes the first and key problematic element of the new social security system, as the biggest challenges pertain to the inclusion of the state sector in EFKA and the financing of the new fund.
According to the law introduced by Labor and Social Security Minister Giorgos Katrougalos, all public sector employees and pensioners will be transferred to EFKA as of January 1, 2017, with the state having to pay the fund the employer contributions towards the social security of its employees, as well as transferring the social security contributions that have just been withheld from the salaries of state workers.