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Government seeks to protect social funds from a second haircut

29 August 2012 / 19:08:41  GRReporter
2385 reads

Victoria Mindova

Greek government is covertly considering a plan to protect the assets of insurance funds from a second debt haircut. This has become clear after the meeting of social partners with Minister of Labour and Social Security Yiannis Vroutsis. Although the government denies a new reduction of external obligations, social partners insist that there must be a plan to protect the insurance funds, which cannot manage in the fifth year of recession anyway.

The tripartite meeting between the government, employers' organizations and trade unionists discussed the issue of the status of the insurance system without reaching a final decision. If the bonds held as assets by insurance funds were cut once again in a new debt haircut, this would lead to the final collapse of the social system in the country.
In the first debt restructuring (Private Sector Involvement - PSI +), government bonds held by Greek social security funds and deposited in the Bank of Greece suffered losses of 53.5%. Rumours of haircutting the Greek debt held by central banks and the European Central Bank (Official Sector Involvement-OSI) have been intensifying since the beginning of summer. Despite the reduction of the debt burden in the beginning of this year, Greek debts to foreign creditors continue to grow. The debt is again around 160% of GDP and its servicing remains difficult to the government. The official position of the heads of the central banks in Europe and the Greek government is that a new restructuring is impossible, but the numbers suggest otherwise. I do not know why you have decided that there would be a scenario for a second debt haircut, Vroutsis ironically remarked to a reporter after the meeting. It has become clear in an informal conversation with representatives of the social partners that this topic is on the agenda and is being currently discussed.

A research of the National Chamber of Commerce shows that the rise in unemployment in the last year cost the social security funds over four billion euro. A second debt haircut would be catastrophic for the insurance funds and even the new reductions of social benefits and pensions would not be able to save them. At the same time, due to the decrease in sales and consumer spending, one out of every two traders has not paid the health and pension insurances of employees. The only way to strengthen the system is by transferring government attention from the cuts in wages in the private sector to the reduction of costs in the public one. President of the trade union of private sector employees Yiannis Panagopoulos said after the meeting: "We are strongly against a new reduction of the minimum wage. This is unacceptable for us and we will not allow it." As for other measures related to the reform of branch labour agreements, Panagopoulos said that nothing could be done, as they had been voted on and already enforced. However, he stressed that the union would not accept a further reduction of the minimum wage in the private sector.

While the negotiations between the social partners and the government were running in the Ministry of Labour and Social Security, municipal workers gathered to protest against the cuts in the budgets of local government organizations. They are against the reduction of funding for municipalities by 40% and announced a 48-hour strike. Municipalities in the country will be closed to citizens on Wednesday and Thursday and will operate with minimum staff.

Representatives of trade unions of municipal employees gathered in Omonia Square in the capital to hold a protest march to the Ministry of Internal Affairs. Both managing staff in city councils and municipalities and their employees were among the protesters. The strikers protested against the wage cuts and the reduced funding of projects and social activities in local government organizations. "Our children remain on the street, the salaries of people have been reduced by 40% and now they want further cuts," megaphones echoed in the Klathmonos Square to the Ministry of Internal Affairs. According to the head of the central union of municipalities Costas Askounis, 40 municipalities have no money to pay the salaries of their employees in September. The executive board of the union met with Prime Minister Antonis Samaras in order to find a solution, but no way out of the situation has been found. A meeting of the executive board of the local government organizations is expected to take place on Thursday, which will give concrete suggestions where to find additional resources.

Tags: SocietyEconomyStrikesForeign debtHaircutGreeceCity councils
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