Turkey’s president vetoes pension reform bill supported by the IMF

ANKARA – Turkey’s president vetoed an International Monetary Fund-backed pension reform bill yesterday, saying it cut already low pensions and that the new retirement age of 65 was too high. The bill is part of a package to overhaul Turkey’s bloated social security system, which the IMF wanted to be passed before it carries out a review to release the next tranche of a $10 billion (8-billion-euro) loan package. President Ahmet Necdet Sezer last month blocked another IMF-backed bill that would unify three social security bodies under one roof to curb expenditures and cut a large deficit. The IMF did not see any immediate threat to the Turkish economic program. «We are confident that the government remains committed to implementing the social security reform, and that they will work to achieve a positive outcome,» an IMF official told Reuters. Analysts agreed but said the vetoes could exacerbate tension between the staunchly secularist president and the ruling Justice and Development Party (AKP), which grew from Islamist roots. «Although we do not think that the president’s veto could harm the ongoing third IMF review process, we believe that the government will be willing to resubmit the social security draft law to the president without changing any article,» said Raymond James chief economist Ozgur Altug. «This re-submission could generate a dispute between the government and the president.» Sezer, who was the chief judge of the constitutional court, has the power to veto a bill only once, but he can go to the constitutional court demanding examination of the law if Parliament enacts it unchanged for a second time. An IMF team started its third formal review talks in Ankara on Monday after Parliament passed the reform bills on April 13. Both the previous IMF reviews – and the related release of IMF funds – were delayed by slow reforms. Reform ‘not fair’ The bill would raise the retirement age gradually to 65 from the current 58-60 and introduce universal health insurance. But a statement from Sezer, who has a record of vetoing key official appointments and laws put forward by the AKP, said a retirement age of 65 was too high in a country with an average life expectancy of 66. «If it is considered that the present pensions are far from providing a minimum standard of living worthy of human dignity, then it is obvious that the new rule which lowers these payments is not fair, reasonable or moderate,» the president, who will himself celebrate his 65th birthday in September, added. Despite a young and growing population, Turkey’s social security deficit is expected to hit 4.8 percent of gross national product in 2005 due to mismanagement, corruption and widespread early retirement. Social security spending surpassed a government projection by 8 percent in 2005, reaching 23.76 billion lira ($17.63 billion). The IMF, which has backed Turkey’s recovery from a deep financial crisis in 2001, and the World Bank have both called for reform, saying the growing deficit is not sustainable. Sezer said the government was responsible for the welfare of its citizens and social services could not be judged by fiscal balances alone.