BUSINESS leaders said yesterday that unless people employed in the broader public sector chip in like the rest, the social security fund is sure to implode.
The call for a fairer social security system came after a meeting between Finance Minister Charilaos Stavrakis and the leaderships of KEVE (Chamber of Commerce and Industry) and OEV (Employers and Industrialists Union).
Stavrakis handed them a copy of a study by actuarial firm Muhanna, showing that the government spends too much on pensions, which take up 2.9 per cent of GDP here compared to the eurozone average of 2.0 per cent.
The study assesses the cost of pensions for the next 50 years between €10 billion and €14 billion.
In Cyprus civil servants contribute towards their social insurance pension around half of what workers in the private sector do. They moreover contribute nothing towards their professional pension, which comes straight out of state coffers. It is a practice that dates back five decades since the establishment of the Republic.
Pension reform is a key component of the government’s professed drive to rationalize public finances.
KEVE chairman Manthos Mavrommatis reiterated yesterday a call for raising the retirement age:
“How can Germany, currently the strongest economy in Europe, manage to increase retirement age gradually and painlessly over a 20-year period, while we over here [in Cyprus] are saying that no such thing is necessary?”
And he proposed that, at least, new hirees in the public sector should automatically join the social security scheme just like people working in the private sector.
“Today there are no free pensions without contributions. We all have to realise this,” Mavrommatis told reporters.
He said also that in coming years any increase in the size of the public sector or any pay rises should likewise be out of the question.
For his part, OEV head Filios Zachariades noted that solutions are needed as soon as possible if the country is to avoid further downgrades by international rating agencies.
Moody’s recently placed Cyprus on notice for a possible downgrade due to the banking sector’s exposure to Greece.
Renowned Cypriot economist and Nobel prize winner Christoforos Pissarides said yesterday the local banking system was robust enough to handle any eventuality – even the worst-case scenario of a Greek bankruptcy.
“No doubt the banks here would sustain some damage, but they have enough capital elsewhere which they can draw on,” he told the state broadcaster.
The Finance Minister also met yesterday with representatives of political parties, to whom he presented the actuarial report.
Summing up his meetings, Stavrakis said they took place “in a positive climate”, but clarified that the government has not yet made specific proposals on how to reform the pension system.
These are the opening rounds in a dialogue the administration has initiated with social partners and the parties. Last week Stavrakis sounded out trade unions SEK, PEO and DEOK, as well as the powerful civil servants union PASYDY.
