Cyprus Mail
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Our View: SGO pension deficits can only be resolved with cuts

THE DEFICITS in the pension funds of semi-governmental organisations (SGO) and municipalities amount to €665 million the finance ministry said in its report on fiscal risks. This was described by Phileleftheros, which ran the story, as an “economic bomb at the foundations of public finances.” This was no exaggeration, although it did not mention that the bomb was well-hidden in the foundations by the politicians who do not want to deal with it because it would require taking unpopular decisions.

They only deal with the deficit at the CyBC pension fund, which is €130 million, because the government regularly goes to the legislature seeking money to cover its immediate needs. According to the ministry’s risk report, the deficit at Cyta is €134m, at EAC €234m and for local government €144m. These astronomical amounts are another example of the super-privileges secured by staff unions at these organisations with the complicity of weak and irresponsible politicians, only interested in winning votes.

These unions managed to persuade the political parties to pass a law stipulating that any losses from investments by pension funds would be covered by the state. So when the EAC pension funds lost more than €10m in bad investments it was reimbursed by the state and the same will have happened with Cyta and the Dromolaxia scandal. This preferential treatment, enshrined in law, also extends to the pension payments negotiated by the unions, which are unsustainable, but nothing is done to rationalise the system, because nobody dares take on the employees.

Even a sensible measure such as halving the pension paid to the spouse of an employee that passed away has not been taken. Another obvious measure is increasing the contribution, assuming they contribute, of those working to the pension fund. Of course, the only rational, long-term solution to the problem of the deficits, which will only get worse if nothing is done, is to reduce monthly pension payments. No matter what the unions might say, these are not written in stone. A pension fund, like a business has to be viable and as a fund cannot make pensioners redundant the only way to stay viable is to reduce the monthly payments.

Of course in Cyprus such rational action is never on the agenda. The politicians take the easy way out which is to keep taking the taxpayer’s money so that EAC, Cyta and CyBC retirees could receive monthly pensions three and four times the average national wage. There is something fundamentally wrong when the majority of people who work are rewarded with a fraction of what many thousands of these semi-government pensioners receive for doing nothing. And worst of all, it is the people who work that will pick up the bill for pension fund deficits.

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