Our View: Government superficiality over pension reform is staggering

Two weeks ago, just after the government had presented its superficial proposals for pension reform, which focused exclusively on the higher payments, we warned that this was far too serious a matter to be reduced to a communications exercise. We had said it was a worryingly slapdash approach to what President Nikos Christodoulides had described as “the most substantial reform of the pension system” since 1980. The main message by Labour Minister Marinos Mousiouttas was that all 123,000 pensioners would receive an increase, while some “50,000 will receive an increase in excess of €100 per month”. The government, to underline its generosity, also proposed to reduce the penalty of 12 per cent for receiving a pension at 63 by 4.5 percentage points. In short, the most substantial reform of the pension system in 46 years was about the distribution of more cash to people from the social insurance fund, regardless of whether the fund could afford this. There was no mention of how the reform would deal with the twin problem of an ageing population and the consistently low birth rate, which is certain to put the social insurance fund under strain in the near future. Nor was there any clarity about when there would be an increase in monthly contributions by workers and employers, which according to the law is scheduled to take place in 2031 after the actuarial study. But there are fears, voiced by both union bosses and employers’ representatives, that the increases that would be given now would be returned via the increase in contributions a few years down the line. It also seemed strange that the government and the social partners agreed that the current reform would not touch contributions, retirement age or pension cuts, presumably because nobody wants to deal with unpopular measures. But how substantial is a reform that only cares about pension increases and does not look at the bigger picture, the future needs shaped by changes in the make-up of the population, the actual cost of the reform and the long-term viability of the social insurance fund? At least, the social partners were not prepared to accept the slapdash approach to the reform. At Thursday’s meeting of the Labour Advisory Council they demanded that the government present a detailed costing of the reform comparing the current regime with what will emerge after all the pension increases are introduced. They argued that what the government had presented so far was too general and did not give a clear picture of the cost of the changes that would be implemented. The issue was also raised at a meeting at the presidential palace on Monday at which the federation of employers’ leadership expressed concern that the proposed increases in pension would lead to higher contributions sooner than is scheduled. What is deeply worrying is that the government seems to be oblivious to these legitimate concerns by both the employers and unions. A couple of hours before Thursday’s meeting, the government spokesman, Konstantinos Letymbiotis was once again using the reform for electioneering purposes. “More than four out of 10 pensioners, a total of 51,664 of our fellow citizens are expected, with the full implementation of the reform to see an increase in excess of €100 per month,” he said. The superficiality with which the government approached the reform is staggering. It has not even bothered giving an assurance that the Social Insurance Fund can afford these increases and seems to expect everyone to back the reform without even providing any figures about the costs. Given this shoddiness, and the insistence on using the so-called reform for electioneering can we trust the government not to make a mess of it? Thankfully, social partners do not seem to fully trust the government, which is why they have demanded detailed analyses of the costs of the reform. We are relying on them to ensure that the government does not make costly mistakes which might need years to put right.