Public pensions in Greece

Public pensions in Greece are designed to provide incomes to Greek pensioners upon reaching retirement. For decades pensions in Greece were known to be among the most generous in the European Union, allowing many pensioners to retire earlier than pensioners in other European countries.^[1] This placed a heavy burden on Greece's public finances which, coupled with an aging workforce, made the Greek state increasingly vulnerable to external economic shocks, culminating in a recession due to the 2008 financial crisis and subsequent European debt crisis. This series of crises has forced the Greek government to implement economic reforms aimed at restructuring the pension system and eliminating inefficiencies within it.^[2] Measures in the Greek austerity packages imposed upon Greek citizens by the European Central Bank have achieved some success at reforming the pension system despite having stark ramifications for standards of living in Greece, which have seen a sharp decline since the beginning of the crisis.^[3]

In proportion to their respective GDPs, the Greek government has historically spent more on their pension system than other European countries. In 2014, Greece spent around fourteen billion euros from the state budget on the pension system. This amount accounts for 7 (or so) percent of its annual GDP.^[4] Despite the increased levels of government spending on the pension policy, Greek workers were still expected to heavily contribute to their pensions. The combination of government involvement and worker contributions created a Bismarckian ^[5] welfare state in which the focus was on income maintenance based on employee and employer contribution (instead of poverty prevention). The mixture of economic crisis and inefficient social redistribution concentrated on pensions has decimated Greece's ability to pursue other forms of social insurance. Greece spends 2% of its GDP on benefits such as housing, family, and poverty relief,^[6] signifying that the Greek government spends around 3.5 times more on the public pension system than on other forms of welfare and social insurance. Furthermore, a significant portion of the Greek population relies on their pensions as the main form of income for their family. As of 2017, nearly one in two families in Greece stated that the money from pensions is the dominant source of salary.^[7]

While Greece has historically given generous pensions at early retirement ages compared to the European average, it has also historically suffered from unequal distribution of pensions and social benefits with already well-paid workers having a major advantage.^[8] Before the economic crisis, in 2008, social wealth redistribution mostly benefited pensioners and social insurance programs while low-income families received less than 10% of available cash benefits.^[9] Given that the 2010 pension reforms placed additional financial burden on impoverished and aging demographics, the full scope of the reforms could not be implemented due to the fear of further exclusion and impoverishment.^[10] Greece's pension reform in 2016 was partially intended to address these issues,^[11][8] and some analysts predict that it has opened the door to further reforms in the near future.^[12]