Pension and labour reforms under social security draft law

After a long process of development and following a ‘memorandum’ of cooperation with the supervisors of the European Commission, the European Central Bank and the International Monetary Fund, which workers and pensioners found particularly aggravating, the Greek Ministry of Labour introduced a social security draft law providing for pension cuts and rises in the retirement age limits.

The draft law on pension and labour reforms, introduced by the Ministry of Labour and Social Security (Υπουργείο Εργασίας και Κοινωνικής Ασφάλισης), contains a series of structural changes such as:

• uniform rules for all insured persons;

• a new pension structure;

• a single Primary Health Care entity;

• unification, from 2018, of the principal insurance entities in three funds (employees, self-employed and farmers).

Content of draft law

Some of its main points are as follows:

• a provision for zero increases in current pensions over the next three years. As of 1 January 2014, any increases in pensions will be in conjunction with increases in gross domestic product (GDP);

• a basic pension with income criteria for uninsured persons over 65 years of age. The pension amount is fixed at €360 and from 2018 it will be financed by the national budget;

• support for pay-related pensions with incentives to increase the minimum term for the payment of social security contributions from 37 to 40 years of work. The requirement of 35–37 years of work still typically applies without, however, giving the right to a full pension;

• a charge on pensions higher than €1,400 in favour of the Social Security Funds Solidarity Account (Λογαριασμός__Αλληλεγγύης__Φορέων__Κοινωνικής__Ασφάλισης, LAFKA) as of 1 August. This measure refers to the main pension and the coefficients are 3%–9%, depending on the amount;

• the general age limit for retirement at the 65th year of age remains intact;

• gradual equalisation, through the increase of the age limits in the private sector, as from 2011, for women insured in the Social Security Fund, by the implementation of the ‘Petralia Act’ as of 2013 (GR0711019I, GR0801059I);

• as of 2011 and up to 2013, an increase in the age limits for the retirement of women employed as civil servants (equalisation with men);

• an increase in the penalty for reduced pensions – also as regards successive insurance – from 4.5% to 6%.

• integration of civil servants to the Social Security Fund (Ίδρυμα Κοινωνικών Ασφαλίσεων, IKA-ΕΤΑΜ) as of 1 January 2013;

• as of 1 January 2018, an individual’s entire working life will gradually become the basis of calculation, with the year 2013 being considered as the base;

• abrogation of voluntary termination of service;

• determination of the pension amount based on life expectancy as of 2020;

• during the three years from 2011 to 2013, the social security contributions of employees and employers to the IKA-ETAM will be raised by three percentage points, with an equal reduction of the contributions to the Labour Employment Office (Οργανισμός Απασχόλησης Εργατικού Δυναμικού, OAED), the Worker’s Housing Organisation (Οργανισμός Εργατικής Κατοικίας, OEK) and the Worker’s Welfare and Recreation Centre (Οργανισμός Εργατικής Εστίας, OEE).

Reaction of unions and political parties

Following a public consultation and the submission of counter propositions, the draft law was introduced in parliament in late May, with a view to being enacted in early June. It caused a strong reaction from all relevant parties.

The Greek General Confederation of Labour (Γενική Συνομοσπονδία Εργατών Ελλάδας, GSEE) and the Confederation of Public Servants (Ανώτατη Διοίκηση Ενώσεων Δημοσίων Υπαλλήλων, ADEDY) immediately organised a protest rally and called for a general strike. They declared themselves to be:

radically opposing the government’s draft law on social security … which dismantles the social security’s financial mechanism, undermines, overturns and discredits its redistributive nature and dramatically reduces the available resources, while the State will no longer be responsible for its financial support, a fact that will have rather heavy consequences for the young generation.

The government was also strongly criticised by the opposition parties: the New Democracy (Νέα Δημοκρατία, ND) party argued that with the social security reform ‘the young people watch their hopes vanish and their right to a decent and sufficient pension become an illusory dream’; the Communist Party of Greece (Κομμουνιστικό Κόμμα Ελλάδας, KKE) asked the government to withdraw ‘the monstrous social security draft law’, and urged the people to engage in ‘a decisive and organised struggle’; the Popular Orthodox Rally (Λαϊκός Ορθόδοξος Συναγερμός, LAOS) proposed ‘one fund and one basic pension for all Greeks, regardless of their length of service’, while the Radical Left Alliance (Συνασπισμός Ριζοσπαστικής Αριστεράς, SYRIZA) called a ‘mass uprising’ because ‘the government is demolishing social security and pensions’.

Commentary

The draft law on social security comes at a time when the country and its people are suffering because of the particularly tough measures proposed by the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF), which impose significant cuts on pensions and allowances. There is no doubt that the further cuts proposed by the draft law will make the situation more difficult, especially for low-income pensioners, and cause job insecurity and severe social unrest, which could become violent and uncontrollable – as it did when three employees died a tragic death when a bank was burned down during the strikes in early May.

Elena Kousta, Labour Institute of Greek General Confederation of Labour (INE/GSEE)