PEO wades in to social security furore

TRADE union PEO yesterday called for an end to the public debates over the Social Security Fund (SSF), which it said would only succeed in spreading unnecessary panic among workers.

“The social security system is one of the biggest achievements of the Cypriot people especially for those who live off their labour,” PEO announced.

Accusing certain political powers of scaremongering and altering the facts, the union said the apparent goal is to spread panic among workers that supposedly in 10 years’ time “there will be no money left for pensions”.

The union’s announcement followed a public spat over the last few days between the government and two of the main parties, opposition DISY and coalition partner DIKO, after the government announced it would submit €200 million to the SSF this year – as part of its promise to do so every year for the next five years in a bid to pay off its €7 billion debt to the fund.

The row ensued when the two parties questioned this move, reasoning that the €200 million contribution didn’t count as it was reinvested in government bonds. DISY’s Averoff Neophytou even accused the government of “accounting tricks”.

However, PEO stressed it had never been faced with the dilemma of whether to call for measures that would ensure the SSF’s long-term viability.

“We demanded a social discussion and participated actively,” said the left-wing union. “Our aim was to find solutions that would allocate the financial burden for the fund’s viability fairly, so that the workers didn’t have to pay the price one-sidedly.”

PEO said the agreement between the unions and government on how to proceed with the SSF was made with actuarial predictions and ensured the fund’s long-term viability.

“If nothing else, those who are scaremongering and being populists today could at least wait until the end of the year, when the new study into the matter is ready,” said PEO.

The union questioned why the agreement between the unions and government was now under fire. “Those with differing views have a duty to state them in a clear way, with specific suggestions. They should state, without reservations what they are truly after.”

However, DIKO Vice President Nicolas Papadopoulos yesterday said if it was true the government had deposited €200 million to the SSF, then it was an “international first” that a debt was being paid yet instead of that debt going down, it was actually increasing.

Papadopoulos, who also chairs the House Finance Committee, said this was the same maths the government had used when they led state-owned airline Eurocypria to bankruptcy.

“It is clear that if the €7 billion debt the state owes to the SSF isn’t paid off, by 2020, the fund will go cash flow negative,” said Papadopoulos, explaining that this would mean the fund will be paying out more in benefits than it will receive in revenue.

In 2009, he added, when the government was seeking an increase in SSF contributions, Labour Minister Sotiroula Charalambous had promised parliament that the government would submit €200 million a year to the SSF to cover the massive debt and would stop taking out loans by withholding the workers’ contributions.

Furthermore, the minister had promised to provide parliament with regular reports on the SSF’s viability, as well as a bill that would regulate the fund’s investment policy, said Papadopoulos.

“In the end, the government took the increases and has lived up to none of its promises until today,” he explained. “The government continues to withhold the workers’ contributions to pay off everything else, apart from pensions.”

In 2009, said Papadopoulos, the government borrowed €286 million from the SSF instead of paying €200 million. “In 2010, instead of paying €200 million, it borrowed over €500 million from the SSF. It seems the same practice will continue in 2011 too.”

He added that the Finance Ministry’s forecast over the state’s debt to the SSF increasing from €7.3 billion to €7.8 billion by the end of 2011 was a clear indication that the state planned to borrow another €500 million from the fund.

“No reports on the fund’s viability have so far been sent to Parliament, nor has a bill, said Papadopoulos.

“So it’s not by chance that the European Union has placed Cyprus among the six ‘high risk’ states in relations to our insurance-pension system,” he pointed out.

Meanwhile, in his speech yesterday at the Limassol Economic Forum, Finance Minister Charilaos Stavrakis repeated the government’s forecast of “positive indications” for next year’s economy – such as a 1.5 per cent growth rate, diminishing tendencies for the public deficit, a lower public debt than the EU average and an increase in foreign investors who will be attracted to the island following Cyprus’ double taxation agreement with Russia.