Daily Times: Greek gov’t promotes new social security system reform, skepticism over sustainability remains

Greece’s Left-led government launched with the dawn of the new year the new umbrella Single Social Security Fund (EFKA) as part of the latest ambitious social security reform aimed to ensure the ailing system’s sustainability and promote social justice.

The overhaul aims to correct mistakes of the past, support the weakest and lay the foundations for a healthy system for future generations, Labor and Social Security Minister Efi Achtsioglou told Xinhua in a recent interview.

Critics of the reform, which was ratified by the parliament in May amid protests by various employees and professionals, doubted the outcome.

They argued that high contribution rates to funds imposed after seven years of steep recession will undermine the bid.

Deficits accumulated due to chronic mismanagement of funding, high rates of undeclared work which deprives the system of vital revenues and a complex, fragmented network comprised of numerous funds operating under different rules, were highlighted by both sides as the key problems the government had to tackle.

The new umbrella Single Social Security Fund (EFKA) that started operating on Jan. 1, 2017 merging a string of social security funds, has been bequeathed about 4 million employees and professionals, 2.5 million retirees, and more than one billion euro deficits.

From now on, the same rules regarding contributions and benefits apply to all, while the weakest are supported, the government explained.

The goal is to distribute the social security contribution burdens in a fairer and proportional way and ensure the viability of the system.

“The aim is to eventually create a safety net so that pensions in the future will not be as low as today,” Achtsioglou said.

Currently about 50 percent of pensioners are receiving pensions of less than 650 euros (694 US dollars) per month.

“As you can understand, this is a situation that cannot continue. We hope that under the new system it will gradually improve,” she said.

The Greek minister acknowledged that the challenges ahead are enormous and no reform can succeed should the growth of the economy not be restored and high unemployment rates not be reduced.

“All these issues are interlinked. The reduction of the unemployment, the struggle against undeclared work which is our focus and the introduction of a clear and transparent social security system, will contribute to the healthy future state of the social security system,” she explained.

Achtsioglou attributed to an extent the criticism to the reform to misinformation, assuring that most insured will not have to pay increased contributions.

Acknowledging the hardships Greek taxpayers are suffering in recent years, she said that the government will make provisions for a transitional period.

“I am not saying that there are no mistakes and oversights. I am not saying there are no real problems professionals are facing today, such as the income reduction or other financial issues. What I am saying is that we will gradually examine all these topics. We have the willingness to make corrections,” the minister said.

Opposition parties and trade unions claim that the new method of calculating contributions leads to considerable increases for many which combined with the burden of taxation will “strangle” the middle income earners.

The one million self-employed professionals, in particular the highest earners, are considered as the big losers from the latest reform.

Under the new system, social security contributions will be calculated according to the taxable income of previous years (for this year based on the tax declarations of 2015), regardless of whether the income has been reduced.

In general, the basic contributions have been set at 20 percent of net earnings for pensions and another 6.95 percent for health care.

The minimum monthly contribution starts from some 160 euros, while contributions must be paid even if the insured have zero income at the moment, which is not a rarity in Greece today.

Even those who still have business complain that over taxation combined with increased social security contributions are leaving them with peanuts and therefore force them to close their receipts books at the tax office, move abroad or tax evade. Most taxpayers have outstanding debts to the tax office, security funds and banks.

“The 80 percent of engineers today do not have an insurance clearance certificate, meaning that they are not allowed to exercise the profession,” Yorgos Stasinos, President of the Technical Chamber of Greece told Xinhua.

“The system is definitely not viable and this will be proved in coming months. Why? Because today nobody can pay his contributions. That is why I am saying that there should be a substantial settlement of outstanding debts in the near future,” he suggested.

“The fundamental problem is that the contributions we are paying today under no circumstance correspond to the level of the medical care we are receiving in return and certainly not to the pensions we will get in the future,” lawyer Elias Sideris said.

Source: Daily Times