Social security crisis

In the early 1990s, the social security system was on the verge of collapse. Exacerbated by severe fiscal problems, the crisis meant that social security funds could barely guarantee the payment of monthly pensions. Memories of the anxious efforts and heavy borrowing by Xenophon Zolotas’s government in order to meet bonus and pension payments in 1989 and early 1990 are still vivid. That crisis forced through changes in the social security system and the implementation of law 1902 after a long confrontation between then-Finance Minister Giorgos Souflias and the powerful unions of the Public Power Corporation (PPC), banks and public sector enterprises. Even then, the measures were inadequate, and it was pointed out that any beneficial impact on the social security system would be short-lived. A second wave of reforms was also provided for, which would put the system on solid foundations and ensure its long-term viability. The government of Prime Minister Costas Simitis, using the findings of a study by economics professor Yiannos Spraos, attempted to tackle the social security issue from a long-term perspective. But the strong reactions to Spraos’s proposals doomed the whole attempt to failure. After a considerable length of time, during which elections were held and the country entered the eurozone, the problem resurfaced even more intensely as the root causes have remained intact. The population is ageing, unemployment absorbs funds from the system, tax evasion is growing, health expenditure keeps soaring and the pension funds have not been restructured and merged. Last spring, after a long evaluation process, attention was drawn to the impasse. Moderate solutions were proposed which would enable the system to survive for a few more years. But those proposals also met with fierce reactions and were withdrawn. This year, a weaker government is treating the social security system as a means to make a political comeback, and has trapped itself in a game of handouts and cuts. A solution to the problem has been shelved for the foreseeable future. And it is certain that this solution will be a violent and painful one, as it will be sought during a period of crisis – as was the case in the early 1990s. This is the great responsibility of a government that is constantly buying political time, placing the burden of a far greater cost on the shoulders of people and society.

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