THE GREEK PENSION SYSTEM: DIFFICULT ROAD TO REFORM

Abstract

Since the beginning of Greece’s financial crisis, the country’s administrative structure, financial practices and service provision system have come under heavy scrutiny. The need for external financial assistance naturally meant that the country has experienced a decrease in its autonomy in relation to the running of its own internal affairs and, for the sake of its long term wellbeing and in order to receive necessary funds, had to make painful and drastic changes with regards to the structure and operation of the state. One of the major sources of tension (Hope, 2015) between Greece and its creditors has been the need to reform the country’s pension system. There is a general acknowledgement that this system is not sustainable in the long term (Cosgrave, 2015), and that it has been a major contributing factor to Greece’s present debt crisis due to its excessively generous nature, rules on early retirement and an ageing demographic. Here we shall analyse the basic past and present features of the Greek pension system, and the various reforms that have been implemented since the beginning of the financial crisis. The operative, foundational principle of Greece’s pension system can be found in the country’s constitution (European Commission, 2013), which makes the state responsible for providing social security for all working people, both employed and self-employed. The Greek pension system itself is based on three pillars (Symeonidis, 2013). The first pillar (Pension Funds Online, 2010) operates as a pay-as-you-go system and provides main pensions, secondary (auxiliary) pensions, and lump sum amounts and provident grants. This pillar accounts for 99% of pensions in Greece, which means that the country is dominated (Adams, 2011) by the state system pillar. The second pillar covers occupational schemes and the third pillar private insurance. In addition to the earnings-based component of the Greek pension system, there is also a minimum level pension(Pension Funds Online, 2010) for those especially deprived and having inadequate means. Greece’s pension system as recently as 2011 was considered to be the weakest in the world (Finke, 2014) in terms of long-term sustainability, and now, even after various reforms, is ranked the 8th lowest in the world (Nardelli, 2015), with no other EU country (Cosgrave, 2015) spending as much on pensions in terms of proportion of GDP, which presently is at