Alogoskoufis faces thorny pension issue
Economy and Finance Minister Giorgos Alogoskoufis yesterday was handed the hot potato of fixing the country’s ailing pension system, a hard task further complicated by a much slimmer parliamentary majority. Prime Minister Costas Karamanlis, who narrowly prevailed in Sunday’s parliamentary elections, has vowed to move faster on crucial economic reforms and dealing with the social security system is a key one. Left unfixed, economists say, the pension «time bomb» could explode in 15 years, straining the country’s public finances. Reforms will seek broad consensus but they will not come easy. At stake are benefits and retirement age limits. The New Democracy conservatives did get the fresh mandate they sought but with a clipped parliamentary majority – 152 seats in the 300-member house, down markedly from 165 when they swept to power in 2004. «Both (parties) have hinted that the social security system has to be reformed and both have also said this will be done without increasing the retirement age or decreasing pensions,» said ING economist Paolo Pizzoli. «The premise is not encouraging.» Alogoskoufis, 51, will have to make sure Greece stays the course of fiscal consolidation. He has vowed a balanced budget by 2010. A professor at Athens University since 1990, Alogoskoufis has a doctorate from the London School of Economics and has published papers on unemployment, inflation and economic development. His first move as finance minister was to reveal that the outgoing Socialists had under-reported the budget deficit to the EU for years, including the year 2001 when Greece joined the eurozone. The conservatives have pleased Brussels by cutting the budget gap to below the 3 percent cap. Under Alogoskoufis’s stewardship, the economy grew by 4 percent, faster than the eurozone, helping to create jobs, but more needs to be done if Greece is to catch up with its richer European partners, the EU has said. Buoyant growth has helped lower unemployment but the country’s jobless rate is still high – 8.2 percent in June and more severely afflicting younger age groups. Besides the ailing pension system, a widening current account deficit that hit 12 percent of GDP last year and stubborn inflation are chronic problems that need fixing, threatening the economy’s competitiveness in the longer term. «After the elections we will continue the policy of reforms to boost growth and further reduce unemployment,» Alogoskoufis said in a recent campaign speech. «Our goal is a balanced budget by 2010 and tackling tax evasion will play a significant role.» (Reuters)
