by Vasiliki Mitsiniotou
ATHENS
The Greek government is struggling to put together the package of pension reforms required by the bailout agreement with its European creditors.
Labor Minister Giorgos Katrougalos on Wednesday submitted an eight-point plan on social security reform to the Economic and Social Committee on Wednesday.
To avoid cuts in primary pensions, the Greek government is working to create a full-scale reform of the pensions system which will include reductions to meet the requirements of Greece’s creditors.
Meeting those requirements is essential for the government if it is to receive further funds under the bailout agreement.
“We will do the utmost to secure pensions without further painful cuts ... and, at the same time, we will try to make the system viable again by proposing an entirely new system,” Greek Prime Minister Alexis Tsipras reassured his leftist SYRIZA party’s lawmakers on in parliament Tuesday.
The Greek government has stressed that making no additional cuts to primary pensions “is not just part of a national policy line but a national need,” Labor Minister George Katrougalos said at a meeting with the head of the EU Labor Ministers Council Nikola Schmidt on Tuesday.
The Greek government has already included cuts in other parts of the pensions system of €493.5 million ($522.52 million) through pension reforms made as part of the state budget for 2016.
Farmers’ social security contributions were increased, allowing the government to earn an estimated €102 million ($110.9 million). A reduction in the number of those who receive low-income pensions of 20 percent will bring savings of €223 million (242.5 million) to the state.
Cuts worth €1.16 billion ($1.26 billion) were made in August affecting pensioners and insured workers which include disincentives to early retirement and a later retirement age, freezing of the minimum pension amount, the increase of pensioner contributions for healthcare from 4 percent to 6 percent of income, and the imposition of a 6 percent contribution for healthcare on supplementary pensions. Early retirement benefits were also cut.
From August 19 and gradually until 2022, the retirement age will increase for civil servants to 67 years of age while before there was no age limit but an obligation of 35 years of service. Those who retire before reaching the 67th year, and who already will receive reduced pensions, will suffer an additional 10 percent reduction.
Private workers were previously able to leave their jobs at 58 or 60, depending on the type of work they do, but now they must retire at 67 years of age and with at least 15 years of insurance payments, or at 62, but with 40 years of insurance.
Lawyer Nikos Siamakis, who specializes in pensions and social security issues, explained that those hit hardest from the pension reforms so far are workers around the age of 55 who must follow the new age requirements and possibly face up to 12 years of extra working time.
“The government wanted to prevent people from massively retiring ahead of the pension reform,” Siamakis said.
Expenditure on public pensions accounted for 14.5 percent of the GDP in Greece compared with 7.9 percent of the average expense in the OECD countries, according to statistics from the Organization for Economic Co-operation and Development.
Deeper reforms in order to secure a viable pension system that include merging several pension funds into one and cutting back supplementary pensions, are now being negotiated with the representatives of the International Monetary Fund, the European Central Bank, and the EU, known as the institutional creditors.
Siamakis points out that the Ministry plans to ensure the viability of the pension system through a zero deficit clause. That way, any pension exceeding the system’s ability will be accordingly decreased ensuring that there is always a zero deficit balance.
“There have been talks about these kind of reforms since 2010” Siamakis says, “but it is the wrong path to take as it only addresses issues within the pensions system. As long as there is recession and deficits, we will not be able to construct a viable pension system” Siamakis says, pointing out that job creation, for example, would create more income for the pensions system.
There seems to be no agreement with the opposition parties either. Earlier on Saturday, Tsipras failed to secure a broader consensus on the pension reforms as the opposition leaders declined to form a joint committee which would prepare proposals.
Socrates Koniordos, a professor of economics and sociology at the University of Crete, believes that the opposition cannot oppose these measures. “The opposition parties have failed to provide a policy alternative and appear substantially fragmented” Koniordos says.
Both Siamakis and Koniordos agreed that, because both the Greek government and opposition parties have signed the bailout agreement back in the summer, the reforms will be passed despite the quarrels at the House.
But there may be popular opposition. The Greeks are weary after six years of punishing austerity. The country's biggest private and public sector unions, GSEE and ADEDY, have called the second nationwide strike this month, another test for the leftists that lead the Greek government.
Greeks are holding their breath to see what December will bring for future pensioners while those already retired also expect bad news.
