------ Forwarded Message > From: "dasg...@aol.com" <dasg...@aol.com> > Date: Tue, 2 Mar 2010 08:10:13 EST > To: Robert Millegan <ramille...@aol.com> > Cc: <ema...@aol.com>, <j...@aol.com>, <jim6...@cwnet.com>, > <christian.r...@daegis.com> > Subject: The Young Have No Jobs but the Old Get Social Security, so .. MUG THE > GEEZERS! >
> "Oh dear, oh dear, whatever shall we do? Life would be GRAND if only we > didn't have to waste our trillions in tax-free unearned income on the 'help.' > Why are there SO MANY of them now? What's the un-messiest way to 'thin the > herd'? What did we use on the bees that bothered our rosebuds?" > Greek crisis may store hidden benefits for Europe > Brian Love > <http://blogs.reuters.com/search/journalist.php?edition=us&n=brian.love&;> , > European Economics Correspondent - Analysis > Mar 2, 2010 > http://www.reuters.com/article/idUSTRE6211DP20100302 > PARIS (Reuters) - Greece's debt crisis may end up helping Europe in the long > run if it pressures governments to start addressing the potentially colossal > costs of pensions and healthcare in coming decades. > > During the boom years of the past decade, racy rates of economic growth and > ultra-cheap credit gave governments less incentive to prepare for a looming > surge in the retiree population, and they were under little if any financial > market pressure to do so. > > But pension reforms being launched in Spain, France and Greece suggest the > Greek crisis is now focusing governments' attention on those problems, and > even giving them the political cover to act. > > "Greece's woes have dragged everyone's longer-term fiscal prospects under the > harsh lights of the interrogation room, and several countries have realized > that in the longer term, they're all like Greece," said UniCredit economist > Marco Annunziata. > > "One quick look at the consequences seems to be enough to send them scrambling > for remedial action. If that is the case, we should all be grateful to > Greece." > > Politicians facing voters every few years tend to balk at reforms that > compromise their hopes of a return to office but pension age increases would > conceivably be harder to reverse than tax hikes. And the pressure is on right > now. > > Indeed, the debts that the financial markets are so nervous about in Greece > and several other European countries are dwarfed by estimates of the burden on > governments if their commitment to future pensions is added to the mix. > > U.S. economist Jagadeesh Gokhale calculates that adding all such "off balance > sheet" liabilities would leave Greece with a debt worth 875 percent of gross > domestic product rather than the 120 percent of GDP officially forecast for > this year. > > For the EU as a whole, the burden would have to be restated at more than 434 > percent of GDP, roughly five times the official count. He estimates Spain's > total burden at 244 percent of GDP, Germany's 418 percent, Britain's at 442 > percent and France's at 549 percent, versus a Greece-like U.S. figure of 890 > percent. > > Gokhale, who wrote a report on the issue last year for the Cato Institute, a > Washington think-tank, uses his figures to argue that governments should > gradually withdraw and let the private sector handle pensions and healthcare. > > RAISING RETIREMENT AGE > > But that ignores another option; pension and healthcare benefits are a social > contract any government can rewrite and that is what Greece, Spain and soon > probably France are doing by raising the retirement age at which people are > entitled to a pension. > > In Britain, the opposition Conservative party is promising to do something > similar if it wins an election later this year and the Danish government spoke > again of reforming the country's early retirement system when it said last > week it would step up fiscal consolidation efforts in the years ahead. > > Street protests last week over plans to raise Spain's retirement age to 67 > from 65 show how fast the Socialist government there chose in the face of > immediate pressures to take steps that will ease the longer-term financial > strains of an aging population. > > Greece, desperate to convince debt investors that it can fix its ragged public > finances, is also considering plans to raise average retirement age to 63 from > 61 along with tax reforms and a brief amnesty for tax evaders that may boost > notoriously weak government revenues longer term. > > And in France, President Nicolas Sarkozy is working on more reforms of the > pay-as-you-go pension system that could feasibly push retirement age beyond a > current average of 60, in addition to other structural cost-cutting steps such > as non-replacement of one in two retiring civil servants. > > The reasons for taking such painful measures have been clear for some time but > are becoming more so as financial markets grow wiser to the extra debt > governments are saddled with as they emerge from recession. > > For much of the time since it joined the monetary union in 2001, Greece > enjoyed trouble-free access to relatively cheap credit on bond markets but the > speed at which that benign climate came to an end has delivered a wake-up for > more than Greece. > > The total sovereign debt of the 27 European Union countries is set to increase > by about a third between 2008 and 2011 alone, from 63 to 84 percent of GDP, > the European Commission says. > > That increase largely reflects the damage recession caused to public finances > through lost government income and higher public spending but it comes at a > particularly inauspicious moment as the costs of catering to an aging > population accelerate. > > PENSIONER NUMBERS TO DOUBLE > > With the number of pensioners set to more than double [in comparison to] the > working-age population in the next 50 years, the Commission estimates that > government spending on pensions, healthcare and other age-related areas will > rise on average by 4.3 percentage points of GDP, from an EU average of 23.2 > percent in 2010. > > Greece faces a particularly daunting challenge if it does not alter policy; > the Commission estimates that [Greece's] age-related spending needs will rise > about four times more than the EU average, or 16 percentage points, over those > 40 years. > > The fact that European governments appear to be concentrating at the moment on > steps to limit structural spending drift rather than temporary tax hikes is > "particularly welcome" as a result, said Deutsche Bank economist Gilles Moec. > > Tens of thousands of protesters took to the Athens streets to protest over > government austerity last week and the specter of pension reform sparked > protests too in Spain and France. > > Unfortunately for many governments, old age is not the only additional strain > public finances have to bear as Europe crawls out of recession with a banking > sector that is still dependent on massive public support. > > Ireland has for example created a "bad bank" to buy stricken land and property > development loans from the country's troubled banks at a price of some 54 > billion euros, money that bad bank could in theory recoup over time. > > Add that 54 billion of contingent "bad bank" liabilities and Ireland's debt > ratio soars from the official 78 percent of GDP to 110 percent of GDP. Even > there, the bad bank liabilities are just a part of "off-balance-sheet" > commitments that would push the grand total to 405 percent of GDP in Gokhale's > calculations. > > Dublin has EU approval to keep the bad bank liabilities "off balance sheet," > just as the White House did after the mortgage finance agencies Fannie Mae and > Freddie Mac were taken under state control last September. > > If all those off-balance-sheet commitments were accounted for, Cato's Gokhale > says EU governments would on average need to set aside 8.3 percent of GDP > every year until 2050 to cope, or else gradually raise taxes to 60 percent of > GDP. > > While they offer a pointer, his calculations remain controversial because they > lump debt that governments have raised and must repay in bond markets with > contingent liabilities they can alter through policy change. > > "It is too early to consider our affluent societies doomed, but it is clear > severe adjustments will have to be made," said Pierre Cailleteau, head of > global sovereign ratings at Moody's Investors Service. > ------ End of Forwarded Message
