ECONOMY

Social security burden

Economy and Finance Minister Giorgos Alogoskoufis told a conference yesterday that the government will soon bring the issue of social security reform to Parliament for debate. Alogoskoufis also talked about the government’s biggest reformist measures so far and outlined its immediate priorities. «In order for social security to be viable in the long term it should already have at least 400 billion euros in reserves, that is, about twice the country’s GDP or twice the public debt,» Alogoskoufis said. He added that, by 2050, spending on pensions as a percentage of GDP will double, to 25 percent from 12.5 percent currently. Also, by that time, the state budget must provide an amount equal to 15 percent of the GDP, up from 5 percent currently. On the government’s efforts to reform the economy, Alogoskoufis said that 2006 will be the year of implementation of the main measures and that their impact will be felt immediately. The government’s main reforms so far, according to Alogoskoufis, have been: – The tax reform, thanks to which corporate taxes are being gradually cut and which will also see personal income tax rates decline beginning next year. The aim is for most people to pay a 25 percent income tax. – The law on investment incentives, voted a year ago. So far, a total of 1,256 investment proposals have been submitted, with a total budget of 2.5 billion euros. Of these, 601 have been approved. Their combined budget reaches 959 million euros, and they will create a total of 3,376 jobs. – The law on Public-Private Partnerships (PPPs), which brought a long-overdue change to the legal framework on infrastructure building and provision of state services. PPPs, said Alogoskoufis, will increase productivity, lighten the burden on public finance and transfer private sector know-how to the public sector. Alogoskoufis described nine economic policy priorities. These consist of: – A new round of privatizations that will help boost competition. – A more effective use of EU funds obtained through the Third Community Support Framework. – Better control of the operation of non-listed public utilities and improvement of their financial results. – Tackling the problem of bank employees’ auxiliary pension fund deficits ahead of the privatization of the remaining state-controlled banks. – Boosting competition in the banking sector, where the great gap between loan and deposit rates is a sign of inefficiency and insufficient competition. – Drafting a National Growth Program for 2007-2013 in order to put to optimum use the 20.1 billion euros earmarked for Greece through the EU budget. – Restoring the credibility of the stock market and preventing its manipulation. – Designing the 2006-2013 Digital Strategy to cover the lost ground in the use of new technologies. -Upgrading the External Trade Board to help boost exports. Ploutarchos Sakellaris, Alogoskoufis’s chief economic adviser, who also spoke at the conference, presented data on the debts accrued by public utilities over the years. Between 1984 and 1997, he said, their borrowing requirements were equivalent to 4 percent of GDP and they burdened the state budget with capital transfers equal to 2 percent of GDP. Things may have improved with the listing of some utilities, but many, especially transport utilities and the state defense industry, are still losing money at a fast rate.