Observation (CEACR) - adopted 2011, published 101st ILC session (2012)

Social Security (Minimum Standards) Convention, 1952 (No. 102) - Greece (Ratification: 1955)

With reference to its previous observation, the Committee takes note of the Government’s reply of 16 May 2011 to the comments made by the Greek General Confederation of Labour (GSEE), dated 29 July 2010, under article 23 of the ILO Constitution on the application by Greece of a number of Conventions, including the present Convention, in relation to the legislative measures taken for the implementation of the support mechanism for the Greek economy. The Committee also takes note of the discussion that took place at the Committee on the Application of Standards during the 100th Session of the International Labour Conference (June 2011) with regard to the application by Greece of the Right to Organise and Collective Bargaining Convention, 1949 (No. 98). It notes that the Conference Committee welcomed the Government’s indication that it was working on arrangements with the ILO for the visit of a high-level mission proposed by the Committee of Experts to facilitate a comprehensive understanding of the issues raised by the GSEE in its comments. The Conference Committee also considered that contact with the International Monetary Fund (IMF) and the European Union (EU) would assist the mission in its understanding of the situation (Provisional Record No. 18, Part II, pages 68–72). The Committee takes note of the report of the high-level mission which visited the country from 19 to 23 September 2011 and held further meetings with the EU and the IMF in Brussels and Washington, DC, in October 2011. Furthermore, notwithstanding the fact that the detailed report of the Government on the Convention due in 2011 has not been received, the Committee notes that the 29th annual report (2011) of Greece on the application of the European Code of Social Security, being a detailed report, contains all the information requested in the report form on the Convention, as well as the Government’s reply to questions raised in the Committee’s previous comments concerning the general responsibility of the Government for the sustainable financing and management of the national social security system in the context of the grave economic and financial crisis. Finally, the Committee takes note of Act No. 3863/2010 on the “New Social Security System and Relevant Provisions” (FEK A’115) of 8 July 2010, the provisions of which are contested by the GSEE.

The Government states that the distortions accumulated in the operation of the social security system have rendered it socially ineffective and economically unsustainable. As the population was rapidly ageing (four workers for one pensioner in 1950 and today, one worker for 1.7 pensioners), the expenses of the system had run out of control and were projected to reach 13.2 per cent of GDP in 2020 and 24 per cent in 2050. This unsustainable situation was amplified by the economic crisis, making it necessary to change the structure of the social security system in order to safeguard its long-term viability and public character. The adoption of the Act No. 3863/2010 introduced a unified and consolidated architecture of the pension system, which was a precondition to raising its functional efficiency and effectiveness. Different funds were merged into three covering workers, farmers and the self-employed. The supplementary pension scheme was reconstructed on consistent insurance principles by withdrawing state subsidies while introducing strict actuarial monitoring of the contributions/benefits ratio. This insurance pillar was complemented by a universal tax-financed scheme, which secured a minimum guaranteed pension for all citizens, including those who were not insured or did not fulfil the qualifying conditions. A transitional period was foreseen (2010–15) for gradually increasing the qualification requirements; pension rights acquired by 31 December 2010 were maintained in full and a number of adjustments were made to avoid hardship to certain categories of persons in the transition phase. Under Act No. 3863 an actuarial evaluation should be carried out one year after the introduction of the reforms, to assess their sustainability.

The Committee notes that in planning substantial changes to the pension system the Government sought advice and technical assistance of the International Labour Office, who insisted on the absolute necessity to adopt parametric and financing reforms to guarantee the overall sustainability of the Greek pension system. In May 2010, following the signature of the Memorandum of Understanding between the Government of Greece and the IMF, the European Commission, the Eurogroup, and the European Central Bank, an ILO mission visited Greece at the request of the National Actuarial Authority and the Ministry of Labour and Social Security to support the quantitative analysis of a set of consolidating reforms of the pension system under the provisions of the draft law No. 3863. The ILO projections delivered on 1 June 2010 showed that the reform would trigger substantial long-term savings for the pension system, to the extent that the deficit, even in view of mounting demographic pressures, would be more or less stabilized during the next five decades, provided that the assumptions of the costing held good. Noting that the new design and parameters of the Greek pension system, which should become fully operational in 2015, are in line, conceptually and technically, with the minimum standards laid down by the Convention, the Committee nevertheless considers that, in the context of the rapidly deteriorating economic situation of the country, the initial costing assumptions in the ILO projections might need to be reviewed, and that the ongoing actuarial evaluation of the Act No. 3863 presents the best opportunity for this. The Committee also considers that, in view of the international obligation of Greece under the Code, it would be prudent for the Government to specifically include among the basic parameters for the projected scenarios for the future development of the national pension system the minimum standards of the Code. The Committee wishes to underscore that an objective actuarial study drawing a red line alerting the Government to conditions which might lead to the possible violation of the minimum international social security standards, will equip the Government with an invaluable tool to exercise effectively its general responsibility for the proper governance of the social security system and seek an enlightened acceptance of the reforms by the social partners in full knowledge of the situation. Bearing this in mind, the Committee asks the Government to explain in detail in its next report the basic assumptions and the resulting conclusions of the current actuarial evaluation of the reforms introduced by Act No. 3863.

Besides the concerns over the long-term viability of the pension system, in the immediate future the country is facing the risk of the social security system being unable to withstand the continuing contraction of the economy, employment and public finances and compelled to reduce the level of protection, which may fall below the minimums guaranteed by the Convention. According to the information collected by the high-level mission of the ILO, which has specifically covered social security among other areas, it was estimated that, in the event that unemployment increases to 1 million people from the current 800,000, social security funds would be losing €5 billion annually and the sustainability of the benefits provided by them would be called into question. Already, in addition to pension cuts operated by Act No. 3863, Act No. 4024/27-10-2011 on “Provisions concerning pensions, the common pay-scale and grading system [in the public sector], the labour reserve and other provisions for the implementation of the mid-term fiscal strategy 2012–15” introduced new cuts in the pensions over €1,000 received by persons below and above 55 years of age of the order of 40 per cent and 20 per cent respectively, as well as reductions in the supplementary pensions. The high-level mission noted that such drastic reductions in the level of benefits undermine the people’s trust in the social security system and raise concerns for social justice in handling the crisis. The Committee observes that the general responsibility of the Government for the proper governance of the social security system obliges it to restore people’s confidence in its ability to be an effective and just regulator and provider of services in the interests of the Greek people. To achieve this, the following principles of social solidarity and justice on which the Convention is based, become particularly important when times are bad:

• -that the cuts in benefits, likewise their costs, shall be borne collectively, spreading fairly among the members of the society in a manner which avoids hardship to persons of small means and takes into account the economic situation of the country and of the classes of persons protected (Article 71(1) of the Convention);
• -that the cuts in benefits shall not result from the unilateral withdrawal of the State or of the employers from the financing of the benefits, thus leaving the employees protected to bear more than 50 per cent of the total of the financial resources allocated to the protection of employees and their families (Article 71(2));
• -that the cuts in benefits and related austerity measures shall be decided and managed in consultation with the representatives of the persons protected as well as of the employers and of the public authorities through the established mechanisms of tripartite social dialogue (Article 72(2)).

In the light of these principles, the Committee considers that it is incumbent upon the Government to assess, with all the parties concerned by the implementation of an international support mechanism for Greece, the resources available to those who evade contributing to the country’s efforts, in order to ensure that they are forced to contribute by legal means. The Committee would like the Government to explain to what extent it abides by the above principles of social solidarity and justice in introducing the social austerity measures in the context of the implementation of the support mechanism for Greece.

Furthermore, the need to strengthen the governance of the social security system would require the Government to plan and assess past and future social austerity measures in relation to one of the main objectives of the Convention, which consists in the prevention of poverty among the categories of the persons protected. The social security system would not fulfil its role if the benefits it provides would be so low as to push the workers below the poverty line; in such cases the State will be seen as failing to fulfil its general responsibilities under Articles 71(3) and 72(2) of the Convention. In this context, the Committee would consider it the duty of the Government to assess, together with all the parties involved in the implementation of the international support mechanism for Greece, the spread of poverty in the country, particularly among persons of small means, and the ability of the available social security benefits to withstand this trend and “maintain the family of the beneficiary in health and decency” (Article 67(c) of the Convention). In doing so, the Government should establish a comprehensive system of statistical monitoring of poverty and consider social security policies in coordination with its tax, wage and employment policies in the context of the obligations undertaken under the international support mechanism. The Committee would like to point out in this respect, as it has done already in its General Report of 2009, that “social security and the overall economy were inseparable, particularly in periods of crisis, and needed to be governed and managed together, at both the national and global levels. It meant that bringing the economy out of the crisis required enhanced measures of social protection and, indeed, making social security part of the solution.” Exploring exclusively fiscal solutions at the expense of cutting non-wage labour costs and basic welfare could eventually lead to the collapse of the internal demand and the social functioning of the State, condemning the country to years of economic depression. Taking into account the gravity of the situation, the Committee calls on the ILO to continue to provide comprehensive technical assistance to Greece in reforming its social security system, and to draw the attention of all the parties implementing the support mechanism for Greece to the need, in order to prevent the drastic impoverishment of the population and mounting social unrest, to maintain social security benefits at least at the minimum levels prescribed by the Convention, as well as to establish the statistical monitoring system of the spread of poverty among different categories of the population and use its indicators to closely coordinate social security, tax and employment policies.

[The Government is asked to reply in detail to the present comments in 2012.]