ECONOMY

No agreement yet reached on social security reforms

The government, trade unionists and employer groups yesterday failed to sign an agreement on social security reforms, although they held out hopes that an accord could be attained in the next two weeks. Odysseas Kiriakopoulos, head of the Federation of Greek Industries, said businesses have reservations on the size of the actuarial deficit resulting from the government’s proposals. «We need to look into the actuarial deficit figures first. But hopefully we should have an agreement within the coming weeks,» he said. The vice president of the traders’ union, Dimitris Armenakis, was equally cautious on the government’s actuarial deficit projections. Critics said the State’s proposals would only introduce marginal changes to the pension system. With more generous benefits to workers who entered the workforce after 1992 and only slightly lower pensions for public sector employees, they said the actuarial deficit could even go up. The only common ground between the parties yesterday was a decision to write off IKA’s debts to the State and various public organizations, allowing it to start afresh with a clean slate. IKA, the pay-as-you-go state social security system, covers some 2.5 million workers and is estimated to have a deficit exceeding 4 percent of gross domestic product. Without reforms, the deficit is projected to more than double to 9 percent of GDP. IKA’s unfunded liabilities are estimated at over 200 percent of GDP. Economy and Finance Minister Nikos Christodoulakis said measures intended to leave IKA with an unblemished record include the State writing off IKA’s debts totaling 4.9 billion euros that are related to old loans and surcharges. It will also pay its obligations amounting to 3.8 billion euros at an interest rate of 3.5 percent, with the first instalment of 1.7 billion euros to be settled this year and the remainder from next year’s general budget. IKA’s estimated 1.5-billion-euro debt to public organizations such as the state employment agency will also be stretched out over a five-year period starting from 2003. Despite the absence of an accord, the meeting was significant as it set out a long-term financing scheme for IKA, Christodoulakis said. He said the State would contribute 1 percent of GDP to IKA annually. The figure could be revised upward every five years following an actuarial study in the event that liabilities exceed projections, he said, bowing to a key demand from trade unionists for the state to guarantee that IKA would have sufficient annual surpluses to cover its obligations. Christos Polyzogopoulos, head of umbrella trade union body GSEE, said the state has agreed that IKA’s liabilities would not increase as other problematic funds are integrated into the system in the future.