Thursday, January 14, 2016

Greek Pensions Crisis: The Last Act of the Greek Tragedy?

by Michael Iakovidis, Daniel Mahoney & Tim Knox

Centre for Policy Studies

Economic Bulletin 70
January 14, 2016

The Greek pensions system, after decades of political exploitation, state interference and crony capitalism, is close to collapse. The system has been plagued by an unsustainable worker to pensioner ratio, endemic corruption along with major financial losses on investments in Greek banks and Government bonds. To sustain the unaffordable pension system, the Greek Government has plugged the gap with €216 billion of subsidies since 2000.

In the summer 2015, the “Troika” (comprising the European Commission, the European Central Bank and the International Monetary Fund) requested further reforms to Greek pensions in return for continuing its financial assistance via the bailout programme. The Greek Government has tabled a package of pension reforms, which is currently being scrutinised by European Ministers. It is probable that reforms to pensions will pass the Greek Parliament later this month, but the underlying deep-rooted problems will not be addressed. The reforms, although politically extremely painful, will do nothing to alleviate the Greek crisis.

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