IKA seeking 1 bln euros

Greece’s largest social security organization, IKA, will have to borrow more than 1 billion euros to pay pensions and benefits at the end of this year and at the start of 2011 due to a massive shortfall in its finances that has been caused by the rising unemployment rate and the inability of a growing number of companies and individuals to pay their monthly contributions. Sources told Kathimerini that the government has little option but to borrow the money and has contacted two commercial banks about the possibility of them lending the funds, though the Labor Ministry has yet to confirm that this is the case. It is expected to make a formal announcement over the next two weeks. IKA already owes some 300 million euros to the Manpower Organization (OAED) for the payment of unemployment benefits, as it has been unable over the last few months to pay out the 200 million euros per month that are needed. The drain on IKA’s financial resources has been fueled by the country’s rising unemployment rate. Unemployment in Greece hit a 10-year high in the second quarter of 2010, according to data released by the Hellenic Statistical Authority (ELSTAT) last month. ELSTAT found the jobless rate had increased to 11.8 percent compared to 8.9 percent a year earlier. That is the highest rate since 2000, when unemployment peaked at 12.3 percent. The proportion of Greeks out of work is expected to reach 15 percent by the end of next year and, according to calculations that IKA has carried out, this would lead to a 25 percent rise in the amount it spends on paying unemployment benefits. The government will need to receive a green light from its lenders – the European Union, the European Central Bank and the International Monetary Fund – before IKA can apply for a loan but at present it doesn’t seem to have other options. IKA recently announced that it would offer favorable repayment terms to businesses and individuals that owed it money but this has failed to have any significant impact on its finances. Sources said that the initiative has only brought in 30 million euros so far.

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