Issue No. 13373

 

FOLLOWING a late-afternoon meeting on January 12 between Finance Minister Yiorgos Papakonstantinou and Labour Minister Andreas Loverdos, a consensus may have been reached about the urgent need to find additional sources of funds to augment the state’s contribution to ensure the long-term viability of the public social security system. 

 

The talks between the two ministers came shortly after Loverdos convened the committee of experts on social security reform to discuss the emergency need for additional reserves by several pension funds that have serious problems meeting short-term obligations, including the Manpower Development Agency (OAED), which manages unemployment benefits. 

 

The labour ministry instructed the committee to calculate the annual level of the amounts that must be collected from a new, yet-to-be-determined tax source for pension-fund capital, a source that would serve as a much-needed fourth pillar of pension-fund financing. This would be in addition to the existing statutory pillars that are the contributions by enterprise, labour and the state budget. The aim of the contemplated tax is to increase fund reserves without burdening the already mounting public budget deficit and debt. 

 

 

Speaking in TV interviews, Loverdos has repeatedly expressed dismay over the financial situation he inherited in October from his conservative New Democracy predecessors.

 

“I fully sympathise with the labour minister over the chaos which he discovered in the pension fund accounts,” Papakonstantinou told ALTER TV on January 12, signalling his willingness to accommodate Loverdos’ demand for additional state funds. “Did you know that the Independent Professionals’ Fund started off 2009 with a budget of 300 million but ended up spending over 1 billion euros by the end of the year?”

 

Papakonstantinou also referred to the problems facing the country’s biggest pension fund, the Social Security Foundation (IKA), which covers most categories of wage earners.

 

“In the last three months of 2009,” the minister said, “IKA has been sending the finance minister monthly cheques of 300 million euros each for additional payments after it had drained the annual budgeted funds that it was supposed to receive from the public coffers.”

 

Some members of the labour ministry’s committee of experts said that piling up fresh tax burdens on taxpayers in order to finance a shrinking set of insurance provisions is self-defeating. In the end, it’s the low-income earners’ pension contributions that are raised through increased taxes. They suggested a radical shift of emphasis from a distributive system of fixed provisions for each public fund, to a system of fixed insurance premiums for different categories of insurance coverage. 

 

Other experts proposed the equalisation of the low retirement benefits envisaged for the newly insured with those of older generations nearing the age of retirement, in conjunction with a system of incentives for those wishing to remain employed past their legal age of retirement. These proposals triggered an outcry by representatives of the civil servants’ union ADEDY which called a 24-hour public sector strike for February 10.

 

 

In an effort to put in order the house of the biggest pension fund, Loverdos warned OTE telecom that it would have to pay at least 100 million euros to help cover the costs of a voluntary retirement scheme in 2005 which cost hundreds of millions in euros to the retirees’ fund.

 

“The government has no intention to clash with OTE,” Loverdos said. “It wants to discuss, on the correct basis, the serious consequences of what occurred in 2005 that it now has to deal with,” he said, adding that “after only a few years from that lucrative pension scheme, we have to handle the very serious outstanding balances which resulted from that regulation. The scheme was very one-sided on the part of OTE at the time.”

 

The scheme, worth over 1 billion euros, has caused serious problems for IKA that must bear its costs. These included paying out huge lump sums to some 6,000 OTE employees eligible for early retirement, so the government is now suggesting that OTE should share some of the burden.

 

The telecom giant’s CEO Panagis Vourloumis has not responded to the minister’s statement. But with a majority of the company’s shares in private hands, it may be difficult for the state to force a revision of the original terms of the scheme on OTE.

 

 

 

ATHENS NEWS 30/08/2010, page: 7