The Greek Pension Reforms: Crises and NDC Attempts Awaiting Completion

Abstract

This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries.

Retirement and Household Expenditure in Turbulent Times

“…Yet unlike other European countries implementing structural reforms due to pressing demographic and fiscal trends (Casey, 2012 ), political, social, and institutional inertia in Greece did not allow for similar action to be taken despite the alarming signs. Pressure on the pension system intensified, leading to claims about a strong causal link between the structural imbalances of the pension system and the subsequent debt crisis (Nektarios & Tinios, 2019 ).…”

The 2022 Greek pension reform: The rebirth of carve‐out privatization in Eastern Europe

“…Like in many other European countries, the generosity of public benefits increased in the decades following the Second World War, with many influential groups and professions securing retirement privileges and special treatment. The lack of political support for appropriate reforms to entitlements (retirement age, benefit structure, privileged groups), which were required over the years to adjust the PAYG system to the evolving economic and demographic environment, gave rise to an increasingly unmanageable system after the 1980s – with pension expenditures being almost decoupled from contribution revenues, growing deficits financed by ad‐hoc government transfers, and the absence of an effective brake on expenditure growth (Nektarios and Tinios, 2019). By 2010 the Greek pension deficit amounted to 7.3 per cent of GDP and accounted for two‐thirds of the overall fiscal deficit (Kangur, Kalavrezou and Kim, 2021).…”

“…In doing so, the development of a supplementary funded pillar to complement future public benefits would also be conceivable. Indeed, the Committee of Experts formed by the government in 2015 did suggest the integration of auxiliary pension into the main pension scheme, but the proposal failed to receive the necessary political support and was not implemented (Nektarios and Tinios, 2019).…”

“…Notwithstanding the novelty element of government managed savings, when promoting the virtues of the 2022 funding reform, Greek officials have been mostly relying on pension privatization arguments put forward by the World Bank in 1994: namely, the expectation of accelerated economic growth and higher benefits for future pensioners ( Athina984 , 2021b). The reasoning behind the pension privatization initiatives in Greece is eloquently summarized in a World Bank discussion paper by Nektarios and Tinios (2019). The authors argue that the existing PAYG system, even after successful fiscal consolidation, would continue to undermine economic growth due to its inability to support the much‐needed increase in national savings and investment that would, in turn, permit Greece to leave behind its “anaemic growth path” (Nektarios and Tinios, 2019, p. 33) – a line of reasoning, also used to promote earlier pension privatization reforms, subsequently refuted by empirical evidence and labelled as a “myth” (Barr, 2000; Orszag and Stiglitz, 2001).…”

“…The reasoning behind the pension privatization initiatives in Greece is eloquently summarized in a World Bank discussion paper by Nektarios and Tinios (2019). The authors argue that the existing PAYG system, even after successful fiscal consolidation, would continue to undermine economic growth due to its inability to support the much‐needed increase in national savings and investment that would, in turn, permit Greece to leave behind its “anaemic growth path” (Nektarios and Tinios, 2019, p. 33) – a line of reasoning, also used to promote earlier pension privatization reforms, subsequently refuted by empirical evidence and labelled as a “myth” (Barr, 2000; Orszag and Stiglitz, 2001).…”