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1) Dwindling pensions a sticking point in Greece bailout talks by Kerin Hope in Athens Financial Times, May 14 [full text] Michalis Akrithakis, a retired civil servant, is preparing to leave Athens to spend the summer at his family home in Crete, where his living expenses will be minimal. “Vegetables from the garden, eggs from my cousin’s chickens and backgammon in the café,” the 72-year-old widower said. “My pension goes much further in the village.” As a former Greek public sector employee, Mr Akrithakis has seen his pension cut eight times in the past five years, slashing his monthly stipend by almost 45 per cent. He is again starting to feel apprehensive despite reassurance by the country’s leftwing Syriza-led government that further cuts are a “red line” that will not be crossed in talks with creditors to unlock €7.2bn of bailout aid. Cutting a deal with creditors has become a matter of urgency for a cash-strapped government struggling to pay its bills. But the dispute over pensions has emerged as a key impediment. During Monday’s meeting of eurozone finance ministers, representatives of all three of Greece’s bailout monitors — Pierre Moscovici from the European Commission, Benoit Cœuré of the European Central Bank, and Poul Thomsen from the International Monetary Fund — cited pension reforms as one of the biggest stumbling blocks in the bailout negotiations, according to officials who were present. The officials said Mr Thomsen referred to them as “exceptionally generous”, and Mr Cœuré warned there needed to be a “full discussion” on how to keep the system sustainable. Sensing the threat, scores of worried pensioners protested outside the central offices of IKA [Social Insurance Institute], the main state pension fund, in April after their monthly payment was delayed by 24 hours. “They [the negotiators] may be forced to make concessions [on pensions] because they’re so desperate for the money,” Mr Akrithakis said. Pensions are a particularly sensitive issue in a country where 2.9m people — more than a quarter of the population — are formally retired even though 1m of them are still below 65. “We still allow people to retire in their 50s on a full pension, for example mothers with underage children who have worked for 20 years,” said Platon Tinios, a Piraeus university professor and international pensions expert. An overhaul of the debt-plagued state social security system was among the first structural measures Greece adopted when it signed up to an international bailout in 2010. Successive governments have since chipped away at pensions and other social benefits as an easy way to reduce spending and meet fiscal targets agreed with international lenders. But they have failed to overcome longstanding problems with cost overruns and fraud. Greek negotiators are now resisting a call for immediate cuts in supplementary state pensions that would wipe out a €300m accumulated deficit in the system and make it sustainable following a spate of early retirements and a sharp drop in employment, both triggered by the crisis. “It would be the start of a downhill slope,” said a labour ministry official. He noted that nearly 40 per cent of retired Greeks already receive pensions below the EU’s poverty threshold of less than €665 in monthly income, compared with fewer than 20 per cent before the crisis hit in 2009. The earlier reform aimed to make Greece’s main “pay-as-you-go” state pension system viable until 2050. But income from workers’ and employers’ contributions fell faster than projected as Greece’s recession deepened, pushing the jobless rate to almost 30 per cent. State pension funds showed a €350m deficit in the first quarter compared with a surplus of €800m last year, following a 12 per cent fall in contributions and a 17 per cent cut in budget subsidies, according to finance ministry figures. “This situation can only get worse . . . The system has maintained high contribution rates even though pensions have been effectively halved . . . This puts severe constraints on hiring and encourages expansion in the informal labour market,” said Milton Nektarios, a former governor of IKA. But like its predecessors, the new government has shown no interest in streamlining dozens of state pension funds that have nominally been consolidated but still run separate operations employing about 15,000 workers. “Structural reforms of the pension system remain unfinished because the funds are used by politicians for making patronage appointments,” Mr Nektarios said. Yanis Varoufakis, the finance minister, has signalled a modest willingness to compromise in the current talks with creditors. “Further cuts in pensions won’t address the true causes of the system’s troubles — low employment rates and vast undeclared labour,” he wrote in a recent policy paper. “Our government is eager to rationalise the pension system, for example by limiting early retirement.” But that sentiment is hardly widespread. Panagiotis Lafazanis, minister for productive recovery and the leader of Syriza’s far-left faction, said this week the government would defend its stance on pensions, declaring in parliament: “Our red lines will remain.” ### 2) 250,000 Pension Applications are Frozen in Greece by Philip Chrysopoulos The Greek Reporter, May 13, 2015 <http://greece.greekreporter.com/2015/05/13/250000-pension-applications-are-frozen-in-greece> The list of retired employees who have applied for pension is getting bigger each day reaching 250,000 applications, while the waiting period may reach up to five years for supplementary pensions. Applications are frozen because pension legislation is pending, while creditors insist on pension cuts in supplementary pensions. At the moment, applications for main pensions, supplementary pensions and the lump sum public sector employees receive upon retirement are delaying, mainly because of the large number of employees who retired in the past three years. The longest delays are for supplementary pensions, mainly because of the complexity of legislation, since there are 17 different supplementary pension funds unified as ETEA [Unified Auxiliary Insurance Fund], and lack of money. There are 120,000 pending applications for supplementary pensions, according to a Single Supplementary Insurance Fund (ETEA) official. At the moment, ETEA is issuing supplementary pensions to those who have applied up until the end of 2013. Also, there are applications pending from 2011 for supplementary pensions of retired employees in the retail sector, who had their own security fund. The accumulated sums of back pensions would be prohibitive at the moment, thus making the issuing of supplementary pensions next to impossible at the moment. At the rate supplementary pensions are issued, those who apply now will have to wait up to five years in order to receive them. Also, another 50,000 retired public sector employees wait to receive the lump sum they are entitled to. The number applies to employees who have retired after September 1st, 2013. However, the lump sums must be first calculated and approved by the labor ministry. Since there are no funds available to pay those sums, the wait will be up to four years. Finally, there are 80,000 applications pending for main social security pensions. Those pensioners will have to wait up to 17 months to receive the pension, while those who are entitled to supplementary pensions will have to wait up to 24 months. At the same time, European Commission statistical figures show that Greece spends more in pensions than other European Union members. Greece paid 16.3 percent of gross domestic product on pensions, and from now until 2030 it will not be less than 14 percent, while the EU average is 12 percent. Thereby, EU creditors are asking the Greek government to reduce pension spending by increasing retirement age to 67 and putting a halt to many early retirements. 3) Greece’s Pension System Isn’t That Generous After All by Matthew Dalton Wall Street Journal, February 27, 2015 <http://blogs.wsj.com/brussels/2015/02/27/greeces-pension-system-isnt-that-generous-after-all> [photo caption: Retired ship’s cook Giannis Rozinos, 78, pictured on the rooftop of his house in Athens. His pension has been cut by about a third in recent years.] Greece’s pension system has become a flash point in the new government’s talks with its international creditors. Prime Minister Alexis Tsipras has vowed to fight more cuts to the system, while Greece’s creditors say more cuts are probably necessary to ensure the government can pay its bills. Before dealing with that question, they’ll need some facts about Greece’s baroque pension system. At first glance, it might seem too generous. But dig a little deeper, and the picture becomes more complicated. First, how much does Greece spend as percentage of GDP on pensions? The data from Eurostat looks like this as of 2012, with Greece expenditure easily highest in the eurozone as a percentage of GDP: [graph shows Greece at 17+% with Italy second at 16+%] But part of that is due to the collapse in GDP suffered by Greece during the crisis. Suppose you look at pension expenditure as a percentage of potential GDP, the level of economic output were eurozone economies running at full capacity: [graph shows Greece second behind Italy, both at 15+%] Greece is still near the top, though it’s not so far from the eurozone average. Moreover, Greece’s high spending is largely the result of bad demographics: 20% of Greeks are over age 65, one of the highest percentages in the eurozone. What if instead you attempt to adjust for that by looking at pension spending per person over 65 (see note below*): [graph shows Greece at 11th place among 20 eurozone countries, at significantly below the average] Adjusting for the fact that Greece has a lot of older people, its pension spending is below the eurozone average. In fairness to Germany and other scolds of Greece, this only happened after major cuts imposed on the pension system by the European Commission, the International Monetary Fund and the European Central Bank — the troika representing its international creditors. But it’s also worth remembering that 15% of older Greeks were at risk of poverty in 2013, above the eurozone average of 13% and a figure that has almost certainly risen over the last year. One area where Greece can clearly do better is by simplifying its pension system. As a Greek pension official described in a speech in November 2013 <http://www.worldpensionsummit.com/Portals/6/The%20Greek%20Pension%20Reform%20Strategy%202010%20-%202013%20Steering%20away%20from%20the%20tip%20or%20the%20iceberg.pdf> Greece in 2008 had 133 separately administered public pension funds. Overhauls begun in 2008 — and continued during overhauls imposed by the troika — were supposed to cut this number to below 13... . . . [*Note: Eurostat’s data on pensions includes pension money spent for old age, early retirement due to medical reasons, early retirement for labor market reasons, disability and “anticipated” old-age. The chart above merely divides that number by the number of people over 65 in each country. So the actual amount spent on each person over 65 will be less than shown on the chart, since lots of people under 65 also receive pensions for various reasons.] 4) Greece pressured to cut pensions further John Psaropoulos reports from Athens, Greece. Al Jazeera, May 10 [entire brief text] Pensions now make up 17 percent of nation's economy, and they have become a safety net for society as a whole. At $18bn this year, they are also the government's biggest expense, despite being cut by half to an average of $900 a month per person. However, there simply are not enough contributions coming in to pension funds because a quarter of Greek workers are unemployed. 5) Greek Gov’t to Propose Tax Hikes, High Pension Cuts to Lenders by Philip Chrysopoulos Greek Reporter, May 8 <http://greece.greekreporter.com/2015/05/08/greek-govt-to-propose-tax-hikes-high-pension-cuts-to-lenders> The Greek government is ready to propose tax hikes and high pension cuts to lenders as part of reforms in order to unlock liquidity for the Greek economy. Also, labor market legislation is put on the negotiation table. So far the two sides seem to converge on the raising of value added tax on everyday goods. Greece is seeking a 16 percent VAT from 13 percent that it is now and maintain the low VAT (6.5 percent) on medicine. Lenders push for a VAT of no less than 18 percent and 9 percent on low VAT. The 13 percent VAT applies to food, power, water bills and transportation. The hike to 16 percent would certainly hurt households. However, the new VAT will apply to goods that now have a 23 percent VAT. Specifically, real estate, cars, fuel, clothing, cigarettes, electronics and appliances will now have 16 percent VAT, if lenders agree and back down from the 18 percent they suggest. Staples, such as bread, milk and medicine will remain at the low VAT. Athens is also considering putting luxury tax on expensive cars, boats and swimming pools, and extra taxes on expensive hotel stays. Also, “solidarity contributions” to incomes of over 30,000 is being considered. Another point of convergence is pension laws. Athens is willing to stop early or voluntary retirements and cut high pensions, but not touch other pensions. Regarding labor market reforms, Athens is willing to discuss collective bargaining and merging of security funds. Labor market laws was a “red line” that the government is now bringing to the negotiation table. _________________________________________________________ Full posting guidelines at: http://www.marxmail.org/sub.htm Set your options at: http://lists.csbs.utah.edu/options/marxism/archive%40mail-archive.com
