The Sallas proposals

The proposals put forward by Michalis Sallas, chairman of the board of directors of Piraeus Bank, on the banks’ social insurance problem, which have already been discussed with Greece’s National Economy Minister Giorgos Alogoskoufis and the Hellenic Bank Association, seem to offer one last chance to reach a settlement on this chronic dispute. The Sallas proposals also meet a basic demand put forward by the Greek Federation of Bank Employees’ Unions (OTOE), calling for the establishment of a single auxiliary fund for all banks by merging the employees’ special auxiliary funds – therefore paving the way for the workers’ consent. Developments on the issue of banks’ insurance funds have been accelerated by the pending implementation in Greece (as of the beginning of the new year) of the International Accounting Standards (IAS) as stipulated by the European Union. This seemingly unconnected directive, which is aimed at improving transparency for all the companies listed on the stock exchange, has underscored a crucial accounting problem which arises from the relationship between Greek banks and their employees’ insurance funds. Banks’ actuarial liabilities, which will have to be deduced from their equity capital according to the IAS, are so large that they will likely undermine banks’ market position. Faced with such a grim prospect, banks are willing to pay 2 billion euros to the state, which, they estimate, will account for 50 percent of actuarial liabilities. It is an extremely tempting offer for the government. Accepting it would not just enable the government to avoid trials and tribulations in the banking system but also allow it to trim the deficit and take a deep fiscal breath. That is because it will immediately receive 2 billion euros and although it will disperse twice the amount, it will do so over a 30-year period. There seems good reason to believe that we are very close to a solution to the banks’ social insurance problem. In any case, this cautious and sector-by-sector approach creates the necessary conditions for a fruitful dialogue. The hurried and maximalistic attempts for a comprehensive settlement on more complex issues like the pension threshold and the retirement age are bound to spark reactions and social turmoil. They leave no room for a compromise solution – a fact reflected in the dismal failure of Costas Simitis to solve the social security issue during his eight-year tenure.