[stop-imf] IMF Directs Pension Reform in Greece

[Robert Weissman]

*IMF: Tackle pensions now*
Social security financing needs will stifle economy after 2010, report
warns

The social security system's financing needs threaten to overwhelm the
Greek economy after 2010 if reforms are not urgently implemented, the
International Monetary Fund (IMF) warns in a still-unpublished report.

The report, expected to be officially published in the coming days,
warns that demographics, specifically the increase in the number of
pensioners relative to persons of working age due to low fertility
rates, will begin to put a squeeze on the Greek economy beginning in 2010.

This is much earlier than other forecasts. The previous, Socialist
government, forced to present a compromise social security reform bill
in 2002 due to opposition from unions and other political parties, had
claimed that it had ensured the financing of the system through 2032.
Later, the General Confederation of Greek Labor (GSEE), relying on
studies by its own affiliated Labor Institute, said problems in
financing the system might arise after 2025. The ruling New Democracy
party, which had sided with the unions in opposing the Socialists'
attempts at reform, has not offered its own assessment but Economy and
Finance Minister Giorgos Alogoskoufis has implicitly acknowledge the
need for an earlier reform by calling for a =ABprolonged=BB dialogue on the
subject. The government's aim, however, is to delay reform, and avoid
the political cost, as much as possible.

The IMF report praises the government for its efforts to achieve fiscal
stability and reform the public sector, but adds that an extra effort
must be made if Greece is to lower the 2006 budget deficit to below 3
percent of GDP. On the question of public utilities, it says the
government is on the right track, adding that the final aim should be
the full privatization of all utilities.

Besides social security reform, the main challenges for the Greek
economy are further fiscal tightening and structural reform of the goods
and labor markets. If carried through, =ABGreece will be in a better
position to converge with Western European productivity and income
levels and take advantage of its neighbors' economic growth,=BB the report
says.