GREECE - The Greek government has announced it will not help finance the intended single auxiliary pension fund for the banking sector. The decision has reopened a bitter political debate between employers, trade unions and the government.

The announcement came two weeks after economy and finance minister Yiorgos Alogoskoufis said that the government would tackle the problem of the chronic deficits in the banking sector’s 11 supplementary pension funds by replacing them with a new single fund.

He also said the state would pay one third of the liabilities.

The plan was intended to resolve the issue of the sector’s pension liabilities before Greek banks have to comply with new international financial reporting standards at the end of June. Under the IFRS they will have to report pension liabilities on their balance sheet, a prospect that could dent the capital base of some banks.

The government’s change of heart, which the Greek press has suggested was prompted by a fear of breaking EU competition law, means that banks will be required to support the new fund on their own.

The Federation of Bank Employees (OTOE) responded to the government’s initial announcement by calling a strike, which started on 6 June. OTOE’s objection was that the fund should not be supported by pubic money. The strike continues.

OTOE president Dimitri Tsoukalas, who told IPE last month that the union would only be satisfied with a fund that was completely funded by employers, said today that the latest announcement was just “a show”. He said OTOE was not convinced that the government would not use public money to back the fund.

Tsoukalas said he believed the government would find a way to finance the fund “through the back door” in a bill to establish the fund. The bill is expected too be tabled in parliament as soon as next week.

He also said the strike had been joined by up to 70% of employees in the largest banks and was likely to continue until next Tuesday.

The finance and economy ministry was not available for comment.