Galery

1

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.

Athina Dretta said the causes of the crisis in the Greek social security system are mainly due to the lack of managerial responsibility in the sector and the lack of information about the economic condition of state institutions - hospitals, companies and others. She stressed that solving these problems is not easy. The problem of accountability is expected to be decided by January 2011 and it is part of the socialist government public sector rescue plan. According to her, it would be better a separate organization to be created similar to the Belgian one to deal exclusively with the collection of social contributions.

The problems with the informal economy and the gaps in the collection of contributions due are among the most serious problems of the ministry. According to information provided by working unions, there are losses of about 53% of the mandatory social security contributions in the Greek economy. The restructuring of the largest social security fund IKA to reduce its cost should enter into force by the summer next year. "The next three months will be extremely difficult. All political forces should engage in the changes, and the society should support them," concluded Dretta.  

Rovertos Spyropoulos – CEO of the Social Insurance Institute IKA – talked about the challenges that the government faces in order to minimize deficiencies in the organization. It was founded in 1934, but new smaller social funds were created during the years which have aggravated the system and impede accountability.

The merger of pension and health insurance contributions is another fundamental error made in the past, said Rovertos Spyropoulos. Professional funds proved to be a burden hanging on the shoulders of workers as they had no coverage to productivity. The expert said that the failure of the main insurance funds was predictable in the early 1990s but the lack of political courage and managerial foresight prevented to carry out the proper reforms earlier. According to him, a step in the right direction was made in 1993 when the then government introduced the same rights and obligations to social security funds not taking into account the organization in which people were insured. The Loverdos-Koutroumanis law presented by the Secretary General of the Ministry of Labour and Social Security Athina Dretta and the merger of small insurance funds in the organization of IKA is another important step in modernizing the system, which unfortunately was delayed by about 50 years, according to Spyropoulos.

Gerassimos Voudouris – CEO of the Social Security Organisation for the Self-Employed – said that his organization is still experiencing structural and organizational problems. The fund has united the funds of different sectors. It has 835,000 people who pay insurances, 320 pensioners and about 2800 employees. The main age group of the people insured in this health-pension fund is between 41-50 years. 80% of the revenues come from contributions and the pensions paid are of approximately the same value. In other words, the total cost is around 4.05 billion euros. The fund’s debtors are around 300,000 who owe an average of not more than 10,000 euros per person. 85,000 of the insured wanted to take the opportunity to pay the accumulated debts to the fund in installments.

The social security fund management has estimated that despite the facilitated payment of old debts to the fund the contributions are still high given the country's economic situation. Therefore, the proposal is to increase the repayment period from 12 to 24 months. It is "better late than never," especially at a time when Greece is in the process of fiscal consolidation and structural reforms. Debtors will be allowed to pay the current bills to the company while paying the old debts. The head of the Social Security Organisation for the Self-Employed proposed not to increase the social security contributions of the self-employed because of the economic recession in the next three years.

Private insurance companies also participated in the forum The Social Security Reform in Greece: Will it work? ΕFG Eurolife’s CEO Alexandros Sarrigeorgiou said: "There are two problems in social security: managerial and structural." Sarrigeorgiou explained that the new social security law, which came into force this year, covered managerial problems to a satisfactory level. However, things are more serious with structural problems. He said almost regretfully: "Recent studies show that this system is not effective enough. More of us will live longer and will demand better living standards." The reasons are the demographic collapse after the baby boom in the 1950s and the trends of aging – not only of the Greek nation but in general.

Public security problems could be solved through cooperation between the public sector and the private companies as well as through providing incentives for the formation of additional savings that will supplement the income of citizens in the future. Alexandros Sarrigeorgiou, who is also Chairman of Life, Health, Pensions & Bancassurance Committee and Member of the Executive Committee of the BoD said: "The answer rests on three pillars - tax incentives, regulatory framework and control." Thus he outlined the prerequisites for creating a new social security system that will combine public and private security to provide the desired quality of life of the elderly.

Alexandros Sarrigeorgiou added that private insurance companies are ready for dialogue. He did not deny that private insurance had its shortcomings in the past, but today all companies that want to be successful in the long term are subject to the requirements of Solvency II. The rules in the new control system of capital adequacy of insurance companies will be finally implemented in 2012 and guarantee proper management of private contributions, providing another condition for successful retirement savings. According to the insurer, private companies could share their successful experience in managing health costs and cooperate with the public sector in the health system restructuring in Greece. Currently, it has monstrous deficits resulting from waste management and lack of control.