ECONOMY

Real social security reform is left for future governments

The draft bill on reforming Greece’s pension system, released and tabled in Parliament by Labor and Social Security Minister Dimitris Reppas last Tuesday, will become law by the end of the month. The government’s copious efforts to close the political «Pandora’s box,» opened by last year’s controversial proposals by Reppas’s predecessor, Tassos Yiannitsis, seem to have borne fruit. The bill holds two prospects: The first concerns the favorable and fair arrangements for certain categories of insured, notably the provisions for retirement after 37 years of work at any age, for those in hazardous occupations and for retiring with a full pension after 35 years of work at age 58. The second prospect arises from an intention to relay detailed reform arrangements to the future. The document refers to presidential decrees regarding the creation of the unified pension and auxiliary funds – mainly the Social Security Foundation (IKA) – offering the insured temporary relief in return for a blank check to the next government to proceed to the nitty-gritty of real reform. There is a widespread feeling that the next round of measures will come in two to three years’ time, denting the government’s credibility and ultimately its hoped-for election benefits. Auxiliary funds The reform measures envisaged in the «framework» arrangements announced last week, such as merging auxiliary funds, increasing the size of contributions, changing the provisions for hazardous occupations, creating the National Actuarial Authority (NAA), and a host of other provisions, will require at least eight presidential decrees and 16 ministerial decisions to acquire the form of detailed regulations. Beyond the makeshift mentality which the need for so much additional «residual» legislation betrays, it also indicates the ease with which the measures announced and projected as beneficial for working people can change. The creation of the NAA, which will be able to intervene in parametric changes (retirement ages, size of contributions and changes), and the provision in Article 6, Paragraph 14 of the bill – according to which the government can amend the sum of legislation regarding auxiliary funds – help explain the wait-and-see attitude of the main opposition party, which hopes to be in government within two years. Sources attribute the particular provision to a «mistake» under the pressure of time to present the draft bill. But the more suspicious are mindful that the initial proposals did not appreciably differ from Yiannitsis’s package last year and that the government insisted during the negotiations, up until the last minute, on including a provision enabling the insured to choose between auxiliary and private insurance schemes. Ultimately this provision, which would have brought the legislation in line with other countries in Europe, was not included in the bill due to reaction from ruling-party affiliated trade unionists. Tactical move? Speculation now has it that the non-inclusion was a mere tactical move, but things will become clear when the bill comes up for debate in Parliament, where the government could well ask for changes. If the bill goes through as it is, the introduction of individual capitalization schemes in auxiliary insurance will be possible on the day after the document is passed. A provision in Article 4 regarding the funding of IKA determines that as of January 1, 2008, all auxiliary funds will have to maintain in individual accounts the contributions of every insured person after January 1, 1993. The initial draft – leaked in order to gauge reactions and then withdrawn – envisaged that an interest rate be determined for the annual capitalization of contributions of salary and wage earners. In practice, contributions will be used in a redistributive fashion (to pay current auxiliary pensions), but the final size of benefits will be fully related to the individual contributions paid over time. Given the power vested in the labor minister to change legislation, such an interest rate could be set, and not made subject to parliamentary approval. The bill, in practice, represents a compromise of all the different views and conflicting pursuits inside the ruling party. Given the lack of proposals by the main opposition, the maximalist positions of the political left and the virtual lack of positions of employers’ organizations, the end result again was a PASOK-type solution; one that first and foremost attempts to serve the internal and electoral requirements of the party and, secondarily, addresses the problems of social insurance. PASOK-affiliated labor unionists (PASKE) played a key role in shaping the solution that has emerged. With the benefit of hindsight, they now say gains could have been even greater. «We had not realized how much last year’s reactions had cost the government and how panic-stricken it was regarding possible new reactions,» they say. The involvement of labor unions in the process began appearing increasingly necessary after the government’s backdown in spring 2001. The strategy was formulated after a series of meetings, starting last summer, between the ministers of labor and economy and senior PASKE cadres and intensive party deliberations initiated by party General-Secretary Costas Laliotis. The strategy envisaged dialogue, proposals by the government, labor reactions, improved proposals and, finally, consensus. However, it was not implemented. Because of «party-patriotism» and the certainty that solutions would be positive for working people, the basic negotiating principles were not observed. In all, the interventions of labor unionists and the conflicts between ministries have probably produced the most makeshift social security bill ever. The bill’s drafters are themselves confused over the provisions favoring working mothers and the size of pensions for those who entered work after 1992. As regards the latter, pensions are raised from 60 to 70 percent of wage earnings, but these are effectively lowered by being linked to the GDP of 1991, probably at the government’s insistence.