Lengthy dialogue a subterfuge?
Economy and Finance Minister Giorgos Alogoskoufis yesterday said there was a need to reconsider the whole social security system and not just the issue of bank employees’ auxiliary pension funds. «The government believes that a national dialogue on the social security issue is necessary. The dialogue must be long-lasting in order to clarify all aspects of the problem, update existing studies and build a common basis on which we will seek the necessary consensus among social partners [employers and employees] and political parties,» Alogoskoufis told reporters yesterday. The minister deliberately did not offer a timetable for this dialogue beyond saying that it would extend «way beyond» the current government’s current term, which normally expires in spring 2008. But he did present some concrete data showing clearly why each of the two major political parties – the ruling conservative New Democracy and the opposition center-left Panhellenic Socialist Movement (PASOK) would rather have the other carry the burden of reform, and the resulting political fallout. According to the data presented by Alogoskoufis, spending on pensions will rise from 12.4 percent of the country’s GDP in 2005 to 17.3 percent in 2030 and 22.6 percent in 2050. Revenue from employers’ and employees’ social security contributions will remain almost constant: 8.3 percent of GDP in 2005, 9 percent in 2030 and 8.8 percent in 2050. The difference is the deficit of the social security system, which will reach 4.1 percent of GDP this year, 8.3 percent in 2030 and 13.8 percent in 2050. This is not a surprising trend in a country with a rapidly aging population which encourages early retirement. If the deficit does not reach unmanageable proportions, one of three things must happen – or all simultaneously: pensions fall, the retirement age increase and/or social security contributions rise. A previous, failed attempt at reform by PASOK in 2001 dared to envisage both lower pensions and higher retirement age. It met with powerful resistance by the Socialist-dominated unions and all opposition parties. Current PM Costas Karamanlis, then opposition leader, had blasted his predecessor, Costas Simitis as «insensitive» to the needs of working people. The result was a half-hearted effort which would cover social security deficits through the budget, as any rise in the contributions by employers and employees was ruled out. The Socialist government said the reform would secure the viability of the system for a 30-year period, but few ever believed that. By calling for a prolonged dialogue, Alogoskoufis acknowledged the obvious. Some kind of more drastic reform will be needed, well before that. Alogoskoufis is not sincere when he says that the government’s pre-election commitment – neither to increase the retirement age nor to cut pensions – is still valid. He relies on the duration of the dialogue not to see this commitment tested. But it will be, eventually. The budget alone will not be able to cover the deficits unless the Greek economy is to enjoy a growth of over 5 percent sustained over several decades.