ECONOMY

Step closer to IKA reforms

The government and umbrella trade union body GSEE yesterday came closer to an agreement on social security reforms after they reached a settlement on key issues regarding state funding and principal social security fund IKA’s obligations toward other smaller ones. Economy and Finance Minister Nikos Christodoulakis accepted a longstanding demand by GSEE that the State guarantees that IKA will always have a surplus by increasing contributions to more than 1 percent of the gross domestic product should the fund run up a deficit. The commitment will be enacted into law. IKA insures 70 percent of the country’s work force. Under the agreement, part of the State’s contribution will be paid in cash and the remainder locked up in a reserve fund for future deficits. Unveiled last month, the State’s funding scheme would come from the budget and be tied to Greece’s growth rate, with the remainder coming from issues of state bonds. The government said the scheme would ensure IKA’s viability up to 2032 and help set up a reserve for future deficits. Social security reforms are considered urgent as the existing pay-as-you-go system is burdened with massive debts. Unfunded pension deficits are currently estimated at over 200 percent of GDP. Yesterday’s settlement also saw the government agreeing to pay 8.8 billion euros to IKA, of which 5 billion euros relate to defaults on guarantees or loans taken up by the fund. A total of 3.8 billion euros would be paid over a period of 15 years. The State will also undertake IKA’s debts to other funds, among them the Manpower Organization OAED and Workers’ Housing Organization OEK, enabling them to continue functioning. GSEE said it plans to hold a series of meetings in the coming days with employers’ groups and the Labor Ministry in the hope of improving their proposals. Bank capitalization