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Old 06-21-2015, 02:24 PM
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Mary Pat Campbell
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
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With a jobless rate of about 26% – youth unemployment is at 50% – and out-of-work benefits of €360 a month generally paid for no longer than a year, pensions have become “a vital part of the social security net for many, many people,” said Vovou. “Retired parents are having to help their adult children everywhere. And now they’re demanding we cut them even more? It’s just so very wrong.”

Pensions have become arguably the biggest hurdle in the tortuous, on-off negotiations between the leftwing government of the prime minister, Alexis Tsipras, and Greece’s creditors: its eurozone partners, the European Central Bank and the International Monetary Fund.

Retired parents are having to help their adult children. And they’re demanding we cut them even more? It’s just wrong.
Sissy Vovou
Before they will release €7.2bn in aid that Greece needs to pay public-sector salaries and pensions and repay €1.6bn in IMF loans, those lenders want further reforms to the pensions system, including penalties to put people off taking early retirement and more cuts to even the lowest pensions.

Tsipras is so far refusing to implement the measures, aimed at shaving the equivalent of 1% of GDP off the country’s pension bill, arguing they will do nothing to help Greece emerge from a slump that has seen the country’s economy shrink by 25%, and may only deepen its humanitarian crisis.

Greece also had a remarkable 580 professions deemed hazardous or strenuous enough to qualify for early retirement: firemen and construction workers, certainly, but also hairdressers (because of the chemicals), wind instrument players (gastric reflux) and radio presenters (microbes in microphones).

But some reforms are under way: those 130 funds have shrunk to 13, the standard retirement age for men has been lifted to 67, and, above all, since 2010 public and private sector pensions have been severely pruned, on a scale ranging from a 15%-cut for the very lowest (under €500 a month) to as much as 44% for highest (more than €3,000).

Greek pensions are now, on the whole, far from exorbitant: social security ministry figures show the average main pension is €713 a month, and the average top-up pension – typically funded by an industry retirement scheme – €169 per month. Some 60% of pensioners get less than €800 gross a month, and 45% live on less than the monthly poverty limit of €665.

Among the pension cuts being proposed is the abolition of the EKAS, a variable supplementary payment made to nearly 200,000 Greek pensioners to bring their monthly income up to €700 a month. (Other suggestions made by Greece’s creditors would hit people like that particularly hard: a hike in the tax on electricity, for example, from 13% to 23%).

Few Greeks think further pension cuts will achieve anything. They may also be illegal: the country’s highest court has already ruled that the private-sector pension cuts pushed through in 2012 were unlawful because they “deprived pensioners of the right to decent life”.

The "blind insistence" on cutting Greek pensions will only worsen the country's already dire financial crisis, Greek Prime Minister Alexis Tsipras wrote in a German newspaper commentary on Thursday.

In a guest column for Der Tagesspiegel newspaper in Berlin, Tsipras also rejected the "myth" that German taxpayers are paying Greek pensions and wages. He said Greeks, contrary to the widespread belief in Germany, work longer than Germans.

"The blind insistence of cuts (in pensions) in a country with a 25 percent unemployment rate and where half of all the young people are unemployed will only cause a further worsening of the already dramatic social situation," Tsipras wrote.

He said that pensions are the only source of income for countless families in Greece. In Athens on Wednesday he also rejected pension cuts that creditors are seeking to unlock aid.

Tsipras also wrote that the state's expenditures for pensions and social spending were cut by 50 percent between 2010 and 2014. "That makes further cutbacks in this sensitive area impossible."

After 2010, measures were put in place by the Greek government that encouraged workers not to take early retirement, making retirement before the age of 60 very difficult. At the same time, the number of annual pension payments was reduced from 14 to 12, after the government eliminated "bonus payments".

The IMF praised the reforms at the time and while the "primary" or core pay-as-you-go system was overhauled, the "auxiliary" or secondary system made no changes.

As it stands currently, Greece still spends more than any other country in the European Union on pensions as a proportion to GDP – with the country shelling out a whopping 17.5 percent according to Eurostat.

However this does not give us the full picture, as Greece has an aging population, with one of the highest "age dependency ratios" or the level of support given to younger and older citizens by the working age population.

The country's old-age dependency ratio is around 30 percent in Greece, one of the highest in Europe, according to Eurostat.

Why are they so crucial?

The IMF has insisted that the Greek government cannot "offer truly credible measures" that will result in a deal without including a further set of adjustments to the pension system.

"Why insist on pensions? Pensions and wages account for about 75 percent of primary spending; the other 25 percent have already been cut to the bone," IMF chief economist Olivier Blanchard said in a blog post on Sunday.

"Pension expenditures account for over 16 percent of GDP, and transfers from the budget to the pension system are close to 10 percent of GDP

"We believe a reduction of pension expenditures of 1 percent of GDP (out of 16 percent) is needed, and that it can be done while protecting the poorest pensioners. We are open to alternative ways for designing both the VAT and the pension reforms, but these alternatives have to add up and deliver the required fiscal adjustment," he added.

An area that has come under intense scutiny in the Grexit debate is the country's pension system - and accusations that it is overly generous. Here some key questions are answered.

What does Greece spend on its pensioners?

According to Eurostat's most recent 2012 data, pensions spending as a percentage of its output or GDP is 30% more generous in Greece than it is in the UK. Greece spends 14.3% of its GDP on old age pensions whilst the UK spends 11.0%

However, because Greek GDP came under sustained pressure during the recession, falling by a whopping 8.9% in 2011 alone, this has the effect of increasing the apparent generosity of Greek pensions.

That said, a country's pensions system must mirror its overall prosperity - no-one would argue that Sudan's pension system for instance should be as generous as say Luxembourg's.

If we look at at the absolute generosity of Greek pensions, Eurostat data tells us that in 2012 the total pensions expenditure per beneficiary for old-age persons was €16,036 in UK and €10,785 in Greece.


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