Nothing highlights the shortsightedness of those who govern Greece more than the disaster of our pension system. It reads like the script of a horror movie: workers and employers pay exorbitant health and pension dues, which, along with huge state subsidies, are so badly mismanaged that Greeks have pathetic state health and education systems; this forces them to pay out of their pockets for medical treatment and tuition. When half the money paid in salaries does not go into workers’ pockets (but into social security dues and taxes), then much less goes into investments and consumption – two of the driving forces of employment.
Not only are workers and their employers being bilked for substandard services, draining funds from the private sector, but the system also places endless demands on the state through subsidized services and the payment of deficits run up by security funds and hospitals. This adds to the country’s debt burden and draws an increasing amount of money away from infrastructure, social services and other foundations of a modern society.
As if this were not bad enough, a rapidly aging population multiplies the effects of the collapsing social security system. Fewer and fewer people enter the labor force, which means that not only will they have to pay intolerable amounts in dues and taxes, but these payments will not be enough to cover the pensions and medical needs of people who are already in retirement. As time passes, it appears increasingly unlikely that younger people will be able to expect pensions and other benefits when they reach retirement age. In 2050, close to 60 percent of the population will be over 65. Who will do the work? With the drain on public coffers, it is extremely difficult for the state to provide the tax breaks, subsidies, and so on, that could encourage families to have more than one or two children.
The social security system is also grossly unfair. Most workers and pensioners are covered by the Social Security Foundation (IKA), by far the largest state fund among scores of minnows. People on IKA pay high dues but receive the lowest benefits. They are also excluded from the system of one-off retirement packages – which can come to 200,000 euros, in addition to a pension. These inequalities are unjust not only to those being shortchanged now but also undermine the whole system for future pensioners.
Given these factors, one would expect that the whole nation would be mobilizing to solve the problem. But any government’s attempt to reform the social security system is met with a universal uproar. Trade unions, opposition parties (even dissidents in the ruling party), workers, professional associations, anarchists, and so on, unite in rare agreement that nothing must be done to disturb the status quo. Virulent protests greet any attempt to consolidate and decrease the large and grossly inefficient number of funds, to increase the retirement age or to raise dues. Everyone agrees that the government should just keep footing the bill. The truth is that feckless politicians and institutional mismanagement – not the size of workers’ contributions nor their retirement age – are mostly to blame for the system’s woes. But with minimal effort going into reforming the system, none of the problems are solved.
The fear of protests has kept this government’s reform effort at a minimum. It appears it has learned the lesson of Costas Simitis’s PASOK government which froze and abandoned all effort to govern when party dissidents and unionists derailed an effort at serious social security reform in 2001. The pension system is still standing because of changes instituted by a highly unpopular New Democracy government in the early ’90s. At that time, thousands of protesters were in the streets every day. Now every opponent of change wants to maintain the status quo that arose from that reform. The irony is nice – but that won’t help save pension funds nor keep the state from going bankrupt. Then, which status quo will everyone want to protect?
Editorial in Athens Plus, 12 June, 2009