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Nation aging and prolonged recession change social security in Greece forever

21 December 2010 / 11:12:53  GRReporter
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A study of trade unions in the country showed that there will be 70% more pensioners in Greece in 2060. The aging of the nation will inevitably lead to an increase in the ratio between working and retired people and the forecasts are that two-thirds of the population will not be of working age. At the same time, the government's objective is the cost of pensions not to exceed 2.6 percent of GDP in the next 50 years. Estimates show that if legal and structural frameworks of social security don’t change spending on pensions and social benefits will be 25% of GDP in 2060 - an amount excessive for any economy.
The data were presented by Scientific Director of the Labour Institute Servas Robolias, who spoke at the annual forum on the future of social security system in Greece organized by the Economist magazine. The theme was The Social Security Reform in Greece: Will it work? The expert stated that currently the majority of workers in Greece are at the age of 50 which means that if the recommendations of the supervisory Troika to reduce social security costs to 2.5% should be followed the government would have to "kill" pensioners not to spend money.
"The purpose of the social security system is not to produce costs in the state budget. It is a system for transferring costs from the present to the future. Therefore, contributions are not calculated in the state budget as current income but as deferred expense," explained the economic advisor of the Greek trade unions. According to him, the answer is not to cut spending on pensions but in finding a new type of economic development based on development of sectors and technologies with high added value to lead to the formation of primary budget surpluses as soon as possible.

He predicted that in contrast to the crises in other countries, leaving Greece's current situation will not lead to the return of lost jobs. Servas Robolias gave the example with the average value in the European Union for the period 2002-2008. Then the average economic growth in the Union was 9% of GDP and the employment growth reached 6%. In Greece, however, the increase in GDP in the same period reached 16% and the increase in employment has not exceeded 5.9%. He blamed the government for focusing on granting state subsidies to the companies instead of focusing on new economy that would give better results in the collection of social contributions and would increase employment.
The government expects there won’t be positive economic growth in Greece before 2012 and its value will not exceed 1% -2% of GDP after that period. The President of the Greek Manpower Employment Organisation Elias Kikilias said that no way has been found so far to provide jobs during recession. "Economic development is important but not necessarily for the opening of new jobs." He gave the example of the Olympic Games held in Greece in 2004 when the local economy had positive economic growth between 4% -5% and unemployment levels were as today - 11% -12% of the workforce in the country.

"Our goal is to keep jobs in a country that has no traditions to comply with strictly defined policies," said Elias Kikilias. The Greek economy recorded recession of about 5.4% in late 2010 as a result of reduced consumption and increased direct and indirect taxes, the companies in the country are experiencing serious difficulties. The organization to maintain employment has started 23 new programs focused on subsidies for social and health contributions of workers so that the companies could keep the existing jobs and not to resort to layoffs or bankruptcy.

The Secretary General of the Ministry of Labour and Social Security Athina Dretta presented the advantages of the new law on social security. She explained that it is not perfect and does not solve all problems of the sector, but provides the basis for creating a more secure, stable and equitable system for the future. The most important points after the reform of the social security system are associated with increase in the age for retirement in line with the new development conditions of the Greek labour market. The minimum age for retirement becomes 60 years from January 1, 2011 and the insured should have 40 years of work experience in order to receive full pension. For those who want to retire but do not have 40 years of working experience with paid social security contributions the pension is reduced by six per cent of the rightful amount for each year preceding the age of 65. 

The procedure for the purchase of insurance years has also changed and the percentages in all insurance funds are uniform and range between 0.8% and 1.5%, the amount being increased with the working experience. "This facilitates the system to save costs and most importantly, encourages continued employment to the official retirement age and the cost of buying years for pension increases with the approach of the adopted legal age."

The new law on employment and social security adopted a new type of pension calculation that takes into account the total income for the entire period, not just the five best-paid years in the entire work experience as until now. Upgrading the list of unhealthy professions is also in the government schedule and it should be completed in the summer of 2011.

Tags: EconomyMarketsSocial security systemGreeceInsurance companies
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