FXStreet (Guatemala) – Analysts at Brown Brothers Harriman explained that Greece’s pension system is in desperate need for reform, and this is something that the previous governments failed to deliver.
Key Quotes:
“One hand, it looks like the most expensive program in the EU at 17.5% of GDP. But, again the implosion of GDP exaggerates this metric. There were over 130 different pension funds. Surely consolidation and achieving economies of scale would generate savings. The system is subject to widespread fraud (an official review in 2012 as part of aid package found 90,000 fraudulent claims and 350,000 “inconsistent claims”).”
“Moreover, there are a large number of professions that have been granted early retirement privileges, which largely reflect the rent-seeking society. Consider that 580 professions, including wind instrument players (gastric reflux) and radio presenters (microbes in microphones) qualify.”
“Yet the creditors (and other observers) should recognize some reforms have been implemented. The 130+ pension funds have consolidated to 13. The standard retirement age for men has been raised to 67, and since 2010, the public and private sector pensions have been cut from 15% (for the lowest, which is under 500 euros a month) to almost 45% for the highest (3000 euros a month). Now the average pension is 713 euros a month. The typical supplemental pension, generally funded by an industry program, is 169 euros a month. This translates into 60% of pensioners receiving less than 800 euros a month, which leaves 45% living on less than the poverty limit of 665 euros a month.”
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