Public pensions in Greece

Greek police guard the National Bank of Greece during the imposition of capital controls

Public pensions in Greece are designed to provide incomes to Greek pensioners upon reaching retirement. For decades pensions in Greece were known to be among the most generous in the European Union, allowing many pensioners to retire earlier than pensioners in other European countries.[1] This placed a heavy burden on Greece's public finances which, coupled with an aging workforce, made the Greek state increasingly vulnerable to external economic shocks, culminating in a recession due to the 2008 financial crisis and subsequent European debt crisis. This series of crises has forced the Greek government to implement economic reforms aimed at restructuring the pension system and eliminating inefficiencies within it.[2] Measures in the Greek austerity packages imposed upon Greek citizens by the European Central Bank have achieved some success at reforming the pension system despite having stark ramifications for standards of living in Greece, which have seen a sharp decline since the beginning of the crisis.[3]

In proportion to their respective GDPs, the Greek government has historically spent more on their pension system than other European countries. In 2014, Greece spent around fourteen billion euros from the state budget on the pension system. This amount accounts for 7 (or so) percent of its annual GDP.[4] Despite the increased levels of government spending on the pension policy, Greek workers were still expected to heavily contribute to their pensions. The combination of government involvement and worker contributions created a Bismarckian [5] welfare state in which the focus was on income maintenance based on employee and employer contribution (instead of poverty prevention). The mixture of economic crisis and inefficient social redistribution concentrated on pensions has decimated Greece's ability to pursue other forms of social insurance. Greece spends 2% of its GDP on benefits such as housing, family, and poverty relief,[6] signifying that the Greek government spends around 3.5 times more on the public pension system than on other forms of welfare and social insurance. Furthermore, a significant portion of the Greek population relies on their pensions as the main form of income for their family. As of 2017, nearly one in two families in Greece stated that the money from pensions is the dominant source of salary.[7]

While Greece has historically given generous pensions at early retirement ages compared to the European average, it has also historically suffered from unequal distribution of pensions and social benefits with already well-paid workers having a major advantage.[8] Before the economic crisis, in 2008, social wealth redistribution mostly benefited pensioners and social insurance programs while low-income families received less than 10% of available cash benefits.[9] Given that the 2010 pension reforms placed additional financial burden on impoverished and aging demographics, the full scope of the reforms could not be implemented due to the fear of further exclusion and impoverishment.[10] Greece's pension reform in 2016 was partially intended to address these issues,[11][8] and some analysts predict that it has opened the door to further reforms in the near future.[12]

  1. ^ "Why they are a flashpoint". The Economist. 2015-06-18. Retrieved 2017-12-08.
  2. ^ "European Central Bank confirms Greece bailout deal". POLITICO. 2017-05-02. Retrieved 2017-12-08.
  3. ^ Rodgers, Lucy; Stylianou, Nassos (2015-07-16). "How bad are things for the Greeks?". BBC News. Retrieved 2017-12-09.
  4. ^ Hayes, Brian (2015-07-02). "What's the issue with Greece's pension system?". The Journal.ie. Retrieved 2018-12-10.
  5. ^ Bonoli, Giuliano (1997). "Classifying Welfare States: A Two-Dimensional Approach". Journal of Social Policy. 26 (3): 357. doi:10.1017/S0047279497005059. S2CID 145216095.
  6. ^ Stamouli, Nektaria (2018-01-02). "Greeks Lean Heavily on Grandparents' Pensions". The Wall Street Journal. Retrieved 2018-12-10.
  7. ^ Manifava, Dimitra (2017-01-24). "Half of families in Greece live on pensions". ekathimerini.com. Retrieved 2018-12-12.
  8. ^ a b Matsaganis, Manos (2011). "The welfare state and the crisis: the case of Greece". Journal of European Social Policy. 21 (5): 510. doi:10.1177/0958928711418858. S2CID 154781996.
  9. ^ Zambarloukou, Stella (2015). "Greece After the Crisis: Still a south European welfare model?". European Societies. 17 (5): 657. doi:10.1080/14616696.2015.1103887. S2CID 155376148.
  10. ^ Georgios, Symeonidis (2016). "The Greek Pension Reform Strategy 2010–2015": 23–25. {{cite journal}}: Cite journal requires |journal= (help)
  11. ^ Georgios, Symeonidis (2016). "The Greek Pension Reform Strategy 2010–2015": 25–27. {{cite journal}}: Cite journal requires |journal= (help)
  12. ^ Georgios, Symeonidis (2016). "The Greek Pension Reform Strategy 2010–2015". World Bank: 27.