EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 19 March 2008 
on a draft law concerning the reform of  the Greek social security system 
(CON/2008/13) 
 
Introduction and legal basis  
On 6 March 2008 a draft law entitled ‘Administrative and organisational reform of the social security 
systems and other social security provisions’ (hereina fter the ‘draft law’) was submitted for adoption to 
the Greek Parliament by the Minister for Employment and Social Protection. As part of the legislative procedure, the competent Permanent Committee for Social Affairs convened on 11, 12 and 
13 March 2008 and adopted the draft law by a majo rity of its members including amendments and 
improvements, thereafter proposing it for enactment by the Parliament.  
The competence of the European Central Bank (ECB) to deliver an opinion is based on Article 105(4) of 
the Treaty establishing the European Co mmunity and the third indent of Article 2(1) of Council Decision 
98/415/EC of 29 June 1998 on the consultation of  the European Central Bank by national authorities 
regarding draft legislative provisions
1, as the draft law relates to a national central bank (NCB). In 
particular, the draft law introduces a number of provisi ons that could affect the status of the Bank of 
Greece, inter alia by integrating the main pension f und of its members of staff (hereinafter the ‘BoG 
Pension Fund’) into a State-run fund, namely the IKA-ETAM.  
In the light of the above and considering the nature of the abovementioned provisions which could affect 
the status of the Bank of Greece as an independent authority, the ECB has decided to submit this own-
initiative opinion, with a view to assisting in the ongoing legislative procedure by commenting on specific 
provisions. 
In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central 
Bank, the Governing Council has adopted this opinion. 
 1. Purpose of the draft law  1.1 The purpose of the draft law, as stated in its explanatory memorandum, is to reform the social 
security system, especially as the ratio betw een active and retired employees has severely 
deteriorated, entailing the creation of deficits w ithin social security entities, which may require 
                                                 
1   OJ L 189, 3.7.1998, p. 42. 
2 subsidising by the State. 
1.2 The draft law aims at: (i) implementing an administrative reform, by drastically reducing the 
existing high number of social security entities; (ii)  adjusting specific social security arrangements 
that require a more efficient approach, increasing th e sustainability of the pension system, inter alia 
by providing for special retirement age, provi ding incentives for staying in service and by 
regulating issues relating to supplementary retirem ent schemes; and (iii) introducing institutional 
changes in the social security system. 
1.3 The draft law is structured to consist of a Part A on administrative and organisational reform, 
basically providing for the integration of sever al individual entities, including the BoG Pension 
Fund, and a Part B on specific provisions and arrangements on social security. 
 2. Description of the reform under the draft law  2.1 According to the explanatory memorandum to th e draft law, the basic principles of the envisaged 
social security reform are the following: (i) the public, redistributive and compulsory character of 
the social security system; (ii) a three-pillar struct ure, i.e. main and supplementary social security, 
occupational social security (occupational funds) and free financing (private social security); 
(iii) the three fundamental parameters of the sy stem (general retirement age limits, level of 
pensions, level of contributions), with ‘mature’ pension rights remaining unaffected; and (iv) the 
application of certain social security arrangements to persons insured before  1 January 1993, taking 
into account the general uniform rules pursuant to Law 2084/1992
2. 
2.2  In terms of the administrative reform bei ng undertaken, the explanatory memorandum states that 
today public social security in Greece is provide d by 155 separate entities. In order to limit the 
resulting fragmentation and achieve economies of scale , to ensure capability for substantial control 
and supervision, to overcome administra tive and organisational difficulties and reduce 
administrative and operational cost, the draft law pr oposes to consolidate funds or integrate entities 
in already existing social security organisations under specific terms and conditions. In this context 
the BoG Pension Fund is to be integrated in to the State-run pension fund IKA-ETAM.   
2.3 Finally, the Greek legislator intervenes in so me specific social security arrangements pertaining, 
inter alia, to retirement age limits and incentives to stay in service for a longer time, taking into 
account increasing life expectancies, as well as to supplementary pensions. Furthermore, the legislator seeks to protect mothers’ rights, creat e a social security capital fund for solidarity among 
generations with the task of financing social security entities as from 1 January 2019 and introduce 
a social security registration number for all citizens.   
 
                                                 
2  Law on social security reform and other provisions (Government Gazette, Vol A/165). 
3 3. Economic analysis of the pension reform  
Greece is expected to experience a strong increase in age-related public spending, which will negatively 
affect the long-term sustainability of public finan ces. Greece is therefore in the group of high-risk 
countries in this respect. The EU Council opinion on the updated 2007 stability programme therefore calls 
for reforms to the Greek pension system. Moreover,  in the absence of commonly agreed long-term 
projections of pension expenditures, the Greek auth orities are urged to produce such projections as soon 
as possible. Taking account of the available info rmation on the planned pe nsion reform, the ECB 
welcomes the overall objective of the pension reform to be brought about by the dr aft law as it is intended 
to improve the sustainability of the Greek pension system and therefore of public finances. The ECB 
understands that consolidating existi ng pension funds would also render long-term projections of pension 
expenditures easier, which would improve the transpar ency of Greek public finances and also support the 
assessment of the stability programme as re quired under the Stability and Growth Pact.  
 4. Central bank independence  4.1 Article 2(4) of the draft law states that the resources of the state-run IKA-ETAM will also include 
those of the entities being integrated, namely contributions of employers and employees, revenues from social resources, property revenues, rem uneration of capital and reserves and any other 
revenue of such entities. This Article goes beyo nd a mere consolidation and restructuring by 
introducing a requirement for the Bank of Greece to  pay the amount of EUR 23 million annually 
into the IKA-ETAM for a period of 15 years (i .e. a total of EUR 345 million), such amount 
corresponding to the Fund’s deficit as calculated on 31 December 1992. 
4.2 The ECB is concerned about those provisions of the draft law that oblige the Bank of Greece to 
make annual contributions to the state-run IKA-ETAM, which may undermine the Bank of 
Greece’s financial independence. The ECB has consis tently stated in its Convergence Reports that 
even if an NCB is fully independent from a functi onal, institutional and personal point of view, its 
overall independence would be jeopardised if it co uld not autonomously avail itself of sufficient 
financial resources to fulfil its mandate
3. It would be inconsistent with the Treaty for a member of 
the European System of Central Banks (ESCB) to  be under a legal obligation to provide financial 
support, potentially by drawing on its own funds, fo r activities that are normally sponsored by the 
State4. 
4.3 The ECB therefore recommends that the new rules which apply to the Bank of Greece should 
contain sufficient safeguards to ensure that the Ba nk of Greece’s ability to carry out its tasks, in 
                                                 
3  ECB Convergence Report of May 2007, p. 19. See also ECB Opinion CON/2008/9 of 21 February 2008 at the request of 
the German Ministry of Finance on a draft law amending the Law on the Deutsche Bundesbank and ECB Opinion 
CON/2008/10 of 21 February 2008 at the request of the Ita lian Ministry of Economic A ffairs and Finance on some 
provisions of the Law on the State annu al and pluriannual budget (2008 Budget Law). 
4  See ECB Opinion CON/2003/27 of 2 December 2003 at the reque st of the Austrian Federal Ministry of Finance on a 
draft Federal law on the National Foundation for Research, Technology and Development. 
4 particular ESCB-related tasks will not be affected . Such provisions should therefore be drafted in 
cooperation with the Bank of Greece.  
 5. Monetary financing aspects of the proposal 5.1 The IKA-ETAM constitutes a body governed by a public law for the purposes of the monetary 
financing prohibition in Article 101 of the Treaty.  First, Article 11 of Law 1846/1951 provides that 
the Social Insurance Institute (IKA) is a lega l person governed by public law. The IKA was 
renamed the IKA-ETAM, integrating a number of pension entities as part of the social security 
system reform undertaken by law
5. Second, Governors and Presidents of Social Security 
Organisations such as the IKA-ETAM are approved by a Parliamentary Committee after a proposal made by the Minister of Employment and Social Protection, following selection of a candidate by a 
Committee composed in its majority of public sector representatives including the Governor or 
Vice Governor of the Bank of Greece
6. It is further noted that, pursuant to Article 5 of the draft 
law, the Governing Committee of the Office in charge of the BoG Pension Fund, after its integration in the IKA-ETAM, will be composed of four representatives: two public sector officials, one representative of the insured pers ons and one representative of employers (Hellenic 
Banks Association or Ethniki Insurance Company), but without any participation of a representative of the Bank of Greece. In terms of financing the IKA-ETAM, Article 2(8) of the draft law states that within six months from the in tegration, a special economic study to be tendered 
and  awarded by the Minister of Economy and Fi nance will be conducted for each individual entity 
and fund being integrated. In the cases where defici ts are identified under this provision, the State 
will undertake to meet the costs of such deficits. In other respects, the provisions of Article 4 of 
Law 3029/2002 will apply as regards th e financing of the IKA-ETAM. 
5.2 In accordance with Article 237(d) of the Treat y, the ECB is under an obligation to ensure the 
NCBs’ compliance with the monetary financing pr ohibition. Based on the information available to 
the ECB, it would appear that the draft law contains provisions that might put the Bank of Greece in a position where national law requires it to conduct transactions that would constitute a breach of 
the monetary financing prohibition. More specifical ly, Article 2 of the draft law requires the Bank 
of Greece to pay an amount corresponding to the de ficit of the BoG Pension Fund as determined on 
31 December 1992 (i.e. EUR 23 million), annually, fo r 15 years. Notwithstanding this requirement, 
the ECB understands that the BoG Pension Fund  may no longer face any solvency deficit. 
Accordingly, provisions of Article 2 could be understood as requiring the Bank of Greece to 
finance a body governed by public law (i.e. the IKA-ETAM). Such requirement would be contrary 
to Article 1(1)(b)(ii) of Council Regulation (EC) No 3603/93 of 13 December 1993 specifying 
definitions for the application of the prohibitions  referred to in Articles 104 and 104b (1) of the 
                                                 
5  By Article 5 of Law 3029/2002 on the reform of the social security system (Government Ga zette, Vol A/160, 11.7.2002).   
6  See Article 134 of the draft law, wh ich amends Article 36 of Law 3556/2007. 
5 Treaty7, which prohibits any financing by the central banks of public sector obligations vis-à-vis 
third parties. If the draft law is adopted, the Bo G Pension Fund will be integrated into the IKA-
ETAM and the Bank of Greece will have no control or influence over the Fund’s asset 
management. Accordingly, the Bank of Greece wi ll no longer be in a position to ensure the 
payment of pensions to its employees, which can no longer be considered to be a task of the Bank 
of Greece but rather a State task.   
 6. Proposed changes to the current reg ime under the Bank of Greece’s statute 
6.1 The Bank of Greece’s statute stipulates the Bank’s duty to provide social security coverage for its 
staff. In this context, it should be noted that the Bank of Greece’s statute forms part of an International Convention ratified by Law 3424/1927 a nd, as such, it has superior status relative to 
ordinary laws (acts of Parliament) in accordance with Article 28(1) of the Greek Constitution. In 
particular, the first sentence of Article 38(4) of the Bank of Greece’s statute establishes the Bank’s obligation not only to remune rate its current employees but also to pay pensions to its retired staff, 
under terms and conditions specified by decisions  of its General Council (subject to generally 
applicable legislation). This obligation is furt her confirmed elsewhere in the Bank of Greece’s 
statute, namely in Article 71(1), which mentions the Bank’s pension payments to its retired staff as 
a regular expenditure item deducted from its gross income when calculating net annual profit, and 
in Article 74, which states that, in the event of dissolution of the Bank, the Greek State ‘shall assume unimpaired full liability for obligations previ ously attaching to the Bank towards its serving 
and pensioned staff in respect of all their rights.’ 
6.2  Recent Greek legislation has confirmed the Ba nk of Greece’s statutory obligation to ensure the 
payment of staff pensions. Thus, the BoG Pensi on Fund was exempted from the scope of Articles 5 
and 6 of Law 3029/2002 pursuant to which the IKA absorbed the individual pension funds of commercial banks. Further, Artic le 18 of Law 3193/2003 explicitly reconfirmed that the payment 
of staff pensions is a statutory obligation of  the Bank of Greece under Articles 38 and 71 of its 
statute. This provision states that ‘the Bank of  Greece shall continue to fully ensure, by any 
appropriate means, the viability of the relevant Social Security Funds and the social security 
benefits payable to the Bank’s staff in accordance with the Charters of the Funds and the legislation 
in force ’ and that, by exception from the single-fund sch eme introduced for commercial banks, ‘the 
Bank of Greece staff funds shall operate under th eir existing legal form and shall remain 
independent […]’
8.  
6.3 In summary, therefore, the introduction of provisions in the draft law relating to the BoG Pension 
Fund touches upon the provisions of Articles 38, 71 and 74 of the Bank of Greece’s statute. 
                                                 
7  OJ L 332, 31.12.1993, p. 1. 
8 Articles 5 and 6 of Law 3029/2002 provided for the integration of a number of pension branches  of various funds as part 
into the State-run IKA-ETAM and IKA-ETEAM with regard  to main and auxiliary pensions, respectively. 
6 Pursuant to Article 7 of that statute, any amen dment thereof is subject to a prescribed procedure 
and must involve specifically defined bodies (decision of the General Meeting of the Bank’s Shareholders ratified by an act of Parliament). It cannot take effect directly and immediately by the 
enactment of a new law alone. The Bank of Greece should therefore be involved in any legislative 
procedure possibly affecting its status. With a view  to the principle of central bank independence, 
the ECB would like to point out that limiting the Bank of Greece’s role in this way is a potential 
tool to influence it unduly in fulfilling its tasks, t hus limiting its independence. In this regard, it is 
useful to note that the ECB defines its staff polic y autonomously and that this autonomy forms part 
of the ECB’s independence as guaranteed by Article 108 of the Treaty and Article 36 of the Statute 
of the European System of Central Banks and of the European Central Bank
9. 
6.4 In the light of the above, Article 1 of the draft law envisaging the integration of the now 
independent BoG Pension Fund into the IKA- ETAM might have implications for the legal 
relationships and career policies of the Bank of  Greece, insofar as it could impair the Bank of 
Greece’s ability to employ and retain the qualifie d staff necessary for the performance of its ESCB 
tasks. Sufficient safeguards are therefore necessary to avoid any potential reduction of the Bank of 
Greece’s independence.  
  
7. Cooperation with the Bank of Greece and the obligation to consult the ECB  Finally, the ECB underlines that the Greek Government  should cooperate closely with the Bank of Greece 
and consult the ECB on any future amendment to the specific rules applicable to the Bank of Greece in 
accordance with Council Decision 98/415/EC, as the provi sions of the Bank of Greece’s statute entrust 
the Bank of Greece with the task of ensuring th e social security coverage for its employees.  
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 19 March 2008. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET 
                                                 
9   See ECB Opinion CON/2008/9.