ECONOMY

Almunia urges reforms in social benefits

Greece must not delay social security reforms since its aging population and high public debt put public finances at risk, European Economic and Monetary Affairs Commissioner Joaquin Almunia said yesterday. «The viability of Greek public finances is at serious risk, mainly because of the very high public debt and the fiscal impact from an aging population,» the commissioner told Ethnos newspaper in an interview. «To confront this challenge, significant reforms are necessary, including the social security system,» he said. Greece is scrambling to cut its budget deficit below the EU’s 3 percent of gross domestic product (GDP) cap this year to avoid sanctions. The country angered its EU partners after revealing it had under-reported its budget deficits for years, even in 2001 when it joined the eurozone. Based on Eurostat 2004 data, Greece’s public debt as a percentage of GDP hit 109.3 percent, the highest debt ratio in the European Union. Servicing this debt load will cost 5 percent of the country’s GDP this year. Almunia said Greece had no time to waste in dealing with what the country’s finance minister recently called a pension system time-bomb. Like other European countries faced with an aging population, Greece fears its troubled pension funds will go bust in the coming decades unless measures are taken soon. The government has said it wants to engage social partners in dialogue to get essential reforms going. Turning to Greece’s efforts to get out of the EU’s excessive deficit procedure, Almunia said the government’s strategy to swiftly reduce the fiscal gap must continue to rely on structural measures for the effort to be viable. «The adjustment must be based on structural measures. Our view is that the correction should take place mainly by controlling primary spending. This must be the thrust in the coming years given the economy’s high growth rates,» he said.