ECONOMY

Merger of pension funds into Social Security Foundation may be too costly, deputy minister says

The planned merger of the special insurance and retirement funds of the large public utility groups and banks with the Social Security Foundation (IKA), the amalgamation of auxiliary pension funds and the financing of the system from the state budget at an annual rate equal 1 percent of the Greek gross domestic product (GDP) are up in the air, as the government realizes the cost of the merger and the extent of the budget contribution to cover that cost. Fiscal problems, as well as the unwillingness of the heads of utilities and banks to fund part of the merger costs – since several of the above companies are planning costly voluntary retirement schemes – are leading the government to reconsider, if not ditch altogether, the main provisions of the law on social security reform (Law 2084), drafted by former Labor and Social Security Minister Dimitris Reppas and passed in 2002. Speaking at the 16th Congress of the Panhellenic Federation of IKA Employees yesterday, Nikos Angelopoulos, deputy minister for Employment and Social Protection (as the ministry has been renamed under the current conservative government), claimed that the merger of the eight independent funds (of employees in OTE Telecom, the Public Power Corporation, the Athens electric railway, National Bank, Agricultural Bank, Ethniki Insurance and in agricultural cooperatives) with IKA, in order to create a unified insurance fund for wage-earners, would create, in the space of three decades, a 22.6-billion-euro deficit. In other words, if plans for such a merger went ahead right away, with a simultaneous reduction in employee and employer contributions, as provided by the law, the government would have to fund IKA to the tune of 760 million euros annually to cover the projected deficit. «Since the public budget is certainly not an inexhaustible source of capital, such mergers would place in doubt the viability of IKA itself,» Angelopoulos said. Angelopoulos criticized the previous Socialist government for not understanding the consequences of the law it passed. «The law was not applied for a couple of years, since no one made the effort to estimate the cost of its implementation,» he said. He added that the merger of the former Ionian and Popular Bank fund into IKA had set «a bad precedent,» adding 600 million euros to IKA’s deficit and, effectively, he said, «offering a 200-million-euro bonus to a certain businessman,» meaning Yiannis Costopoulos, into whose Alpha Bank Ionian and Popular Bank merged. Angelopoulos said the government will open an official dialogue with all interested parties in order to evaluate which parts of the law may indeed apply. He promised that no change would be made to the retirement age, pension or social security contribution levels, but that the timing and the merger of the funds, as well as the financing of the merger, will have to be re-evaluated. If necessary, the government will try to find alternative ways of funding the social security system if fund mergers prove non-feasible. He pointed out that the budget funding, said by Socialist Economy and Finance Minister Nikos Christodoulakis to ensure the viability of the system until the year 2032, was barely able to cover IKA’s needs, excluding the costs of hospitalization of IKA members. Angelopoulos also accused the previous government of never settling the State’s debts to IKA, despite its declarations, adding that the debt now amounted to 3.9 billion euros, making a new settlement necessary. IKA is faced with a dire financial situation, resulting from the evasion of dues.