"austerity" Greek style

[Brendan Burgess]

I have a friend who lived in Greece and he painted a picture of people simply not paying their taxes and public servants' pensions being left to their eldest child after their death. I am not sure to what extent it is true, but here is what I have found online.

From the Spectator

Compounding these issues were the ludicrously low retirement ages for public sector workers – civil servants employed before 1992 could retire on 80 per cent of their final salary after 35 years’ service, if they had reached 58. A Greek workforce of approximately 2.7 million is, therefore, paying for approximately the same number of retirees. As this is clearly unsustainable, Greece’s creditors have insisted that pensions be pared back.

A good summary of the measures here

After some initial hesitation in the wake of the crisis, some first measures were announced in February and March 2010 - before the first bailout. These included a 10% cut in salaried bonuses and a recruitment freeze in the "narrow public sector" (central government); increases in VAT rates (from 19% to 21%) and in taxes on petrol, cigarettes and alcohol along with some parametric changes in income taxes; and some moderate cuts in expenditures (including in public investment) and central government operating costs. The first Memorandum of May 2010 introduced a much more pervasive set of measures. Wages in public utilities were cut initially by 3%; the so-called 13th and 14th salaries (bonuses for Christmas, Easter and annual leave) were capped at €500 for public sector employees, €400 for pensioners and completely abolished for high-wage earners; VAT rates increased further (to 23%) and additional tax hikes were imposed on luxury consumption (e.g. an additional 10% tax on imported cars), on so-called inelastic expenditures (alcohol, cigarettes and fuel) and on property; additional levies were imposed on high pension earners and business profits; and further savings were envisaged through controls on public expenditure and investment.2

The Memorandum also saw a radical reform of the pension system (voted on in Parliament in July 2010). The retirement age was raised from 60 to 65 (from 55 to 60 for special categories) and was to be equalised for men and women by 2015. Penalties were introduced for early retirement, and pension payments were to be suspended for pensioners who were still employed - completely for pensioners below the age of 55 and by up to 70% for older pensioners. The number of insurance and pension funds was to be reduced through mergers and consolidations, aiming at the establishment of three unified funds by 2018, resulting in a sizeable reduction of pension entitlements for a number of professional occupations (lawyers, journalists, doctors, etc.). Replacement rates for new retirees were capped at 65% and all final salary schemes were to be abolished. Finally, limits were imposed on pension transferability (to offspring and widowed spouses).

 

[gillarosa]

I know people in US who have retired age 50 or so after 25 to 30 year service on full and attractive salaries so what is the point of the article? That geography should dictate retirement benefit? Even Michael Noonan spoke about the plight of people in Greece a few nights ago, for example mass unemployment and no unemployment payment after a year. like the Irish the average Greek person was not responsible for the crisis they have found themselves.

 

[Delboy]

Finally, limits were imposed on pension transferability (to offspring and widowed spouses).

When all the various stories about Greece were breaking at the height of the crisis, the one about pensions for unmarried daughters of OAP's and civil servants was right up there with the best
http://www.bloomberg.com/news/2010-...-difficult-to-defuse-for-unwed-daughters.html

Sophia Constantinidou works as a teacher in a private school in Athens. She also has a more lucrative job: remaining unmarried.

The 52-year-old gets 400 euros ($496) a month from the Greek government, part of her late mother’s state pension. Under the current system, Constantinidou qualifies to receive the payment for life as the only surviving child of a deceased civil servant, provided she doesn’t tie the knot.

“It’s not that I didn’t want to get married,” Constantinidou, whose mother died 20 years ago, said in an interview. “But after I turned 40, I realized I wouldn’t be getting married and that thankfully I had this.”

 

[Gerry Canning]

I had some inkling of the perverse oddity in some of the Greek pension set-ups, but Del-boys addition is laughably sad.
To have pension age moved to at least 65 seems eminently sensible.
To have pension transferability limited (I assume done fairly) seems sensible.
To be able to retire with 80% of your salary after 35 years ,sounds very much like something that needs hard pruning!
Bear in mind that to have 1,000 euro pension @ 65 requires savings of 24,000 euro ,I cannot see how the 80% was saved for (and they can retire as early as 58).

Having said that,
To have no Social Welfare after one year unemployed is grossly unkind.
To have 25% unemployment is very hard, we have nuff problems @11%
To have 50% of youth with no jobs is very sad.

Syriza ,
They may well be correct that the (elite) in Greece have screwed Greek people over the years, but it is going to require a huge transformation if the examples given are symptomatic of were Greek society has drifted.
Looks like too many Greeks are caught in decades of poor Government ,and it is difficult to see any option that is fair to Citizens whilst their elected politicians and their (elite) make sure that the (elite) are left in situ.
I just cannot see how years of ignoring problems and dodging issues can be resolved.
I would be concerned that what is quoted in Press are only extreme examples that do not overly affect the real costs, but if they are genuinely good sample examples of where Greece is at, then Greece is banjaxed.

I wish Syriza and Greek people well.

 

[so-crates]

From what I could see, the trouble was there were clear and unambiguous cuts that needed to be made a long time ago. The Greek social net was not truly a social net but rather weighed down by an accretion of little privileges that led to little direct economic benefit on either a personal or a national level. However, the timing of pruning them meant that their impact was ... difficult to swallow, deflationary and deeply unpleasant. Whatever else comes out of this hopefully Syriza will not seek to re-establish the previous status quo that dramatically and disastrously ratcheted up the effects of the global crisis.

 

[44brendan]

I listened to an interview with the new finance minister with Ivan Yates. He came across as a pragmatic and realistic individual with previous experience. While pre-election rhetoric was strong on restoring jobs, they are limited by funds on what they can do, irrespective of any debt write-down agreed. There is no potential to restore the type of Civil Service packages that were previously in place and realistically there would be little potential to restore many Civil Service roles as otherwise funds would have to be taken from other needed social spend budgets.
As most of us have learned, politicians have short memories of pre-election promises and Syriza will be every bit as limited on funds as the previous Government.