Meanwhile In Greece, Pension Funds Tap Emergency Loans

This has not been a great year to be a pensioner in Greece. 

Over the course of the country’s fraught bailout talks, Greece’s pension system was frequently in the troika’s crosshairs. As for PM Alexis Tsipras, pension cuts were generally considered to be a so-called "red line" and intractable disagreements over pension reform quite frequently resulted in the total breakdown of negotiations. 

Meanwhile, the increasingly untenable financial situation and acute liquidity squeeze very often meant that payments to pensioners were in doubt, even as Athens went out of its way to assure the public that whatever funds were left in Greece’s depleted coffers would go to public sector employees before they would go to EU creditors or to Christine Lagarde. 

The situation reached it’s "heartbreaking" low point on July 1 when Greek banks that had been shuttered after the institution of capital controls opened for a few hours to ration payments to long lines of pensioners who were forced to effectively beg for €120. 

In theory, the bailout agreement - while promising more austerity and more pressure on the bloated pension system - should at least guarantee that there will be money in the banks to make monthly payments, but that assumption now looks to be in doubt because as Kathimerini reports, both IKA and ETAA are tapping a contingency fund that guarantees social security programs for fear that the provisions of the bailout will not provide for sufficient enough savings to fund the remainder of this year’s payouts. Here’s the story:

Greece’s state insurance funds are resorting to external loans to cover their needs as fears grow that the measures of the third bailout will not be enough to cover the rest of 2015’s liquidity needs.


The Unified Fund for the Self-Employed (ETAA) received funding from the Generational Solidarity Insurance Fund (AKAGE) to cover its legal and notary workers’ branch. A similar application for 180 million euros has been approved by the board of the country’s biggest insurance fund, the Social Insurance Institute (IKA).


A ministerial decision by Labor Minister Giorgos Katrougalos and Alternate Finance Minister Dimitris Mardas foresees economic assistance to the tune of 20 million euros from AKAGE to ETAA to cover part of the latter’s deficit.

Of the course the punchline to the idea that funds from AKAGE will be used "to cover part of ETAA’s deficit" is this:

The deficit of AKAGE is expected to grow due to the dramatic increase in unemployment, political and economic uncertainty, capital controls, the measures of the third memorandum and the early elections, which are expected to impact on the revenues of insurance funds this autumn.

So in short, the pension funds are broke as is the contingency fund meant to guarantee payouts from those funds. 

So Greece, we truly do wish you the best of luck and as you head back to the polls next month, don’t forget, if things get really bad, you can always storm the mint...