June 18, 2015
Greek pensions have been a source of acrimony since the first bail-out five years ago. Germans in particular, who were being asked to retire later, resented having to help what they regarded as feckless Greeks, many of whom were drawing pensions in their 50s. Yet since then there have been two major reforms, pushing the statutory retirement age up from 60 for women and 65 for men to 67, while pension benefits have been cut. So why are they still such a point of contention?
One reason was the dire starting-point. As George Symeonidis, a board member of the Hellenic Actuarial Authority, said earlier this year, “the reforms have not finished, nor is it possible to reform a system in four years, when nothing has actually been changed for decades.” Before the first bail-out in May 2010 the system was already heading for disaster, with pension outlays among the highest in Europe at 13.5% of GDP in 2009 and projected to reach nearly 25% of GDP by 2050.
In part this reflected an especially generous set of benefits, which provided the highest “replacement rate” (of earnings before retirement) for public pensions among the OECD club of 30 or so mainly rich countries before the euro crisis, in 2008. The basic system required only 35 years of contributions rather than the 40 generally needed in pension systems to get a full pension. Pensions could be taken much earlier than in other countries, with people who had contributed 37 years able to retire in their late 50s on full pensions.