State signs deal relieving IKA of its huge liabilities

The government yesterday signed an agreement with the Social Security Foundation (IKA) settling its debts to the country’s principal social security fund in the form of cash payments staggered over a three-year period and non-tradeable bonds with a total value of 1.45 billion euros. The agreement underlines the government’s determination to push ahead with social security reforms despite criticism from opposition parties and opposition from private and public sector trade unions. The latter is scheduled to stage a 24-hour general strike on June 18 to coincide with parliamentary discussion of the State’s proposals. The deal covered 3.8 billion euros owed by the State, slightly less than half of its total debt of 8.5 billion euros. The government has said it will write off the remaining 4.68 billion euros related to loans taken out by IKA which it has failed to pay off. Economy and Finance Minister Nikos Christodoulakis said the agreement constitutes «a significant component of the new funding arrangement for IKA.» Miltiadis Nektarios, governor of IKA, said the pact underscores the State’s commitment to ensuring the fund’s long-term viability. Under the accord, the State will settle part of its 3.8-billion-euro debt to IKA with a cash payment of 1.47 billion euros this year. It will make an equivalent contribution next year and pay 880 million euros in 2004. It will also compensate IKA for the staggered payments by paying an interest of 3.5 percent for the last two installments. The bonds which were transferred over to IKA yesterday comprised four issues launched in the first four months of this year. The biggest issue, 500 million euros, was launched in March and matures in 2005. It pays a coupon of 4.65 percent. The April issue raised 253 million euros, the smallest. It has a duration of 20 years and a 5.9-percent coupon. The bonds are non-tradeable. IKA, however, is allowed to cash in up to 15 percent of the value of the paper. The Greek Federation of Bank Employee Unions (OTOE) yesterday added its voice to the growing number of critics of the government’s social security reform proposals. OTOE said it will ask for an immediate meeting with the government in order to clarify the State’s inconsistency regarding its promises to the sector. The federation said the official proposals did not touch on its suggestion to set up a single social security fund for banking employees nor an agreement to create a fund for the self-employed. It claimed that the reforms would result in reduced pensions for those banking workers entering the work force before 1983 and also those after 2008. It also said the proposals interfere with the workings of supplementary funds. OTOE said it plans to convene its general council next week to decide on strike action.

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