This is virtually an op-ed piece, including a quote from the
fucking Cato Institute. Mark my words, the world bourgeoisie will
not be satisfied until the G8 nations have the same kind of "free
market" policies that can be found in China or any other 3rd world
country.
NY Times March 11, 2010
Patchwork Pension Plan Adds to Greek Debt Woes
By LANDON THOMAS Jr.
ATHENS — Vasia Veremi may be only 28, but as a hairdresser in
Athens, she is keenly aware that, under a current law that treats
her job as hazardous to her health, she has the right to retire
with a full pension at age 50.
“I use a hundred different chemicals every day — dyes, ammonia,
you name it,” she said. “You think there’s no risk in that?”
“People should be able to retire at a decent age,” Ms. Veremi
added. “We are not made to live 150 years.”
Perhaps not, but it is still difficult to explain to outsiders why
the Greek government has identified at least 580 job categories
deemed to be hazardous enough to merit retiring early — at age 50
for women and 55 for men.
Greece’s patchwork system of early retirement has contributed to
the out-of-control state spending that has led to Europe’s
sovereign debt crisis. Its pension promises will grow sharply in
coming years, and investors can see the country has not set aside
enough to cover those costs, making it harder for Greece to borrow
at a reasonable rate.
As a consequence of decades of bargains struck between strong
unions and weak governments, Greece has promised early retirement
to about 700,000 employees, or 14 percent of its work force,
giving it an average retirement age of 61, one of the lowest in
Europe.
The law includes dangerous jobs like coal mining and bomb
disposal. But it also covers radio and television presenters, who
are thought to be at risk from the bacteria on their microphones,
and musicians playing wind instruments, who must contend with
gastric reflux as they puff and blow.
And Greece may be an early indicator of troubles to come. Bigger
countries like Germany, France, Spain and Italy have relied for
decades on a munificent state financed by a range of stiff taxes
to keep the political peace. Now, governments are being pressed to
re-examine their commitments to generous pensions over extended
retirements because the downturn has suddenly pushed at least part
of these hidden costs to the surface.
The situation in the United States is different but also painful.
The government will face its own fiscal reckoning, analysts say,
as 78 million baby boomers begin drawing on Social Security and
Medicare programs to support them in retirement. Without some
combination of higher taxes, benefit reductions or an increase in
the retirement age, both programs will run short of money to make
their promised payments within the next few decades. And many
American states are woefully behind on funding their pension
obligations for public employees.
In Europe, the conflict has already erupted on the streets, with
workers demanding that generous retirement policies be kept while
governments press to pare pensions and raise retirement ages
because taxpayers cannot bear any additional weight and creditors
will no longer finance excessive borrowing.
The problem goes well beyond how to keep up payments and deal with
budget deficits resulting from the financial crisis. Because of
generous promises, unfunded pension liabilities in Europe far
outweigh the stated debt that governments owe creditors, which
have caught Greece and several other weak European nations in a
borrowing vise.
According to research by Jagadeesh Gokhale, an economist at the
Cato Institute in Washington, bringing Greece’s pension
obligations onto its balance sheet would show that the
government’s debt is in reality equal to 875 percent of its gross
domestic product, which is the broadest measure of a nation’s
economic output. That would be the highest debt level among the 16
nations that use the euro, and far above Greece’s official debt
level of 113 percent.
Other countries have obscured their total obligations as well. In
France, where the official debt level is 76 percent of economic
output, total debt rises to 549 percent once all of its current
pension promises are taken into account. And in Germany, the
current debt level of 69 percent would soar to 418 percent.
Mr. Gokhale, like many other economists, says he believes that
this is a more appropriate way to assess a country’s debt level
because it underscores the extent to which the cost of providing
for rapidly aging populations, if left unchanged, will add to
already troubling debt burdens.
“You have to look ahead and see how pension expenditures are
rising in comparison to the revenues needed to finance them,” he
said. “It’s not just Greece; all major European countries are
facing pension shortfalls. It is a very difficult challenge
because it involves selling pain to current voters.”
He estimates that to fully finance future pension obligations, the
average European country would need to set aside 8 percent of its
economic output each year, a practical impossibility given that
raising already high taxes so much would impose a crushing
economic burden.
Mr. Gokhale has done a similar calculation for the United States
and estimates that the truest measure of federal government debt,
incorporating Medicare, Medicaid, Social Security and other
obligations, is $79 trillion, or about 500 percent of the nation’s
output. Currently, its public debt is equal to about 60 percent of
its domestic output.
Many of these liabilities will not be coming due for decades. But
as most developed countries experience having fewer workers to
cover pensions and health care bills for the elderly, their
ability to borrow more is rapidly approaching its limits.
In its 2009 annual report on Greece, the International Monetary
Fund warned that the government’s excessive pension and health
payments to the elderly would result in a debt level of 800
percent of its output by 2050 if left unchecked, similar to the
figures Mr. Gokhale calculated. That is a theoretical number, of
course: international creditors, who are already balking at
lending Greece more money, would require changes in government
programs well before Athens borrowed that much.
“The pension crisis is the biggest single test of Greece’s
willingness to tackle longstanding reform,” said Kevin
Featherstone, an expert on the Greek political economy at the
London School of Economics. “Any meaningful reform must lead to
reduced benefits for workers — the government needs to show that
it can overcome union pressure.”
Greece has proposed raising its average retirement age to 63, and
that may be just a beginning.
The French president, Nicolas Sarkozy, has met with union leaders
and broached the prospect of raising the normal retirement age
from 60. Spain has gone further, proposing to raise the retirement
age to 67, from 65. In the face of union opposition, however, the
government is wavering.
Pensions have become a divisive topic not just among workers and
governments, but among governments within Europe. Germany, which
has taken politically difficult steps to increase its retirement
age to 67 while reducing benefits, is serving as the most stubborn
taskmaster on fiscal matters for Greece.
Greece’s pension problem far outweighs the finagling with its
accounts that it relied upon in the early 1990s to get its
official deficit figures low enough to qualify to join the euro
club. A recent report by the European Commission found that the
amount Greece spends on pensions and health care for its aging
population, if left unchecked, would soar to about 37 percent of
its economic output by 2060 from just over 20 percent today,
making it the highest level in Europe.
“Projected pension expenditures are expected to double,” said
Manos Matsaganis, a professor at the University of Athens and
author of numerous papers on Greece’s pension system. “That is
unsustainable.” Still, the millions who have come to rely on these
payouts will not give up their pensions easily. “Nobody thinks
they have to be the one to sacrifice,” Mr. Matsaganis said.
That’s certainly true of Christos Bourdakis, a retired government
accountant. Sitting in a dusty union hall in Athens, he is in no
mood to offer any concession on his pension, regardless of the
severity of the crisis.
He is a full-throated proponent of a system that pays him a yearly
gross pension of 30,000 euros, or $41,000, more than he was making
when he retired 13 years ago at the age of 60. He has even written
a book in defense of it, “The Guide to Granting Civil Service
Pensions in Greece.”
“We have to protect our standard of living,” Mr. Bourdakis said.
“The pensioners should not have to pay for the crisis created by
the bankers.”
Niki Kitsantonis contributed reporting.
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