ECONOMY

Funds in need of 1.7 bln euros

Greece’s social security funds are in need of a 1.7-billion-euro cash injection, in addition to allocations from the 2009 budget, to help meet pension and healthcare obligations despite recent reforms aimed at helping ensure the system’s viability. Lower-than-expected employee social security contributions and above-budget pension and pharmaceutical expenses have contributed to this shortfall, sources said. Greece’s largest fund, IKA, is believed to require some 680 million euros with another 450 million euros needed for OAEE, which covers the self-employed, among others. Reforms voted in last year – which merged scores of funds into just 13, cut many special and supplementary pensions and offered incentives to work longer – have been described by critics as being too weak to have any long-lasting effects on the system. Greece’s deteriorating labor market is also having an adverse impact on social security contributions due to fewer positions of employment. Job losses in the construction and tourism sector are believed to be taking a heavy toll on IKA’s social security contributions as the two sectors account for 20 percent and 15 percent of its pension fund revenues respectively. Additional funding requirements for pension funds will place an extra strain on the budget that has seen revenues drop due to the slowing economy. Greece’s budget deficit is projected to widen in 2009 to 5.1 percent of gross domestic product from 5 percent in 2008, as slower economic growth weighs on revenue collection, according to the European Commission.