Finance Minister Harris Georgiades said on Tuesday there was no point in the state borrowing money to return some €7.5bn taken from the Social Insurance Fund (SIF) by various administrations in the past.
The massive debt to the SIF is the result of years of governments borrowing from the fund to plug holes in public finances.
Speaking in parliament on Tuesday, Georgiades said borrowing money to replenish the SIF meant raising the public debt.
“They are communicating vessels. There is no logic raising the debt and having the general government paying interest for the fund to engage in investment policy without any yields,” he told the House labour committee.
Georgiades said the government guaranteed the SIF reserve and would cover any shortfalls, as it did in the unemployment fund in recent years.
The minister said a reserve would be created from day one of a steady flow of revenue from natural gas.
“In theory we could say that part of the reserve would be on behalf of the SIF,” he said.
Georgiades and Labour Minister Zeta Emilianidou stressed that investments should not exceed the state’s cost of borrowing from international markets.
“Any investment would affect the state’s reserves and the public debt because the SIF is part of the general government,” Emilianidou said. “If the cost of borrowing is four per cent, there cannot be an investment from the fund yielding three per cent because that would be an increase of public debt.”
Emilianidou said the government has prepared a bill abolishing the SIF’s capacity to make investments – it will be transferred to the national investment fund, known better as the hydrocarbons fund.