The Greek pension crisis

Greece is tottering on the brink of financial disaster. The EU and IMF (with US taxpayer support) have just put together a bailout package worth $145B that may actually make the situation worse. (more here) Greek union workers are rioting (more here) over austerity measures announced by the government as part of the bailout agreement. One reason that Greece, and the rest of Europe for that matter, is in such a steep financial hole is their ridiculous pension system. Combine that with the fact that Greece and much of Europe are in population decline, there simply aren’t enough payers to cover all the payees. (more here from Mark Steyn)

This story (from the NY Times) outlines the outrageous pension system in Greece. It’s easy to see why it is unsustainable – easy, that is, to everyone but the Greek statists.

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.

So, what types of jobs are classified as “hazardous?”

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.

This classification makes almost 700,000 workers, about 14% of the workforce, eligible for early retirement at full pay. This phenomenon is not exclusive to Greece. Other European countries have similar policies.

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.

And as European countries are looking for ways to back out of their socialist, collectivist policies in order to survive, America is pursuing these very same policies that have plagued Europe. Will we ever learn?


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