A FEW WEEKS ago, Finance Minister Charilaos Stavrakis said that the pensions system in Cyprus was a ticking time-bomb in desperate need of reform. Nobody could ever accuse Stavrakis of being alarmist. On the contrary, he makes a habit of putting a positive spin on all issues, even at the risk of being laughed at. This was a warning we are obliged to take very seriously.
On Monday the Governor of the Central Bank, Athanasios Orphanides, who does not always see eye to eye with the minister on economic policy, issued his own warning, likening the Social Insurance Fund to a time-bomb. For the Fund to remain viable budget surpluses were needed and deficits were no help at all. This was perfectly consistent with what the Cyprus Association of Actuaries said in a press release issued last week.
The Association predicted that the Fund would run out of money by 2020 unless the government started repaying its debt to the Fund, which amounted to €7 billion, by then. For all pensions to be paid until 2050 the government should have repaid the full amount to the Fund by then, hence the need for budget surpluses. The Association also predicted that before the end of the decade the payments made by the Fund could be greater than its revenue, which would make the repayment of the government debt an imperative for its continued viability.
Minister of Labour and Social Insurance, Sotiroulla Charalambous, was so annoyed with these gloomy forecasts she called a news conference on Monday to give assurances that the Fund was in perfect shape and that revenue from contributions and investments would cover its spending until 2044. She claimed there had been misinformation by the actuaries, whose forecasts were based on wrong data. As things stood, contributions alone were enough to keep the Fund viable for another 20 years.
So was her cabinet colleague Stavrakis talking nonsense when he spoke about a ticking time-bomb? And had Orphanides issued his warning to cause panic among pensioners? Was the Association of Actuaries so irresponsible that it issued its warning on a whim? Mrs Charalambous belongs to a government that obdurately refuses to touch the wages and pensions of public sector employees, despite the need to reduce the budget deficit. Her assurances are of little comfort given the president’s refusal to take unpopular measures for the benefit of the economy. Why had her colleague Stavrakis called union bosses for discussions on the pensions system a few weeks ago if everything was hunky dory?
This government has such a poor record on managing the economy and has got its forecasts badly wrong so often it has become impossible to take anything it says seriously.
