Alexis Tsipras on "the Truth and the Myths" about Greek Pensions and the Social Security System

Article published in Tagesspiegel, translated into Greek, Naftemporiki

NB English text of PM Tsipras' Opinion Piece "German taxpayers are not paying for Greek pensions"
 can be found below

From in.gr - Απάντηση Τσίπρα στους «μύθους» για το ασφαλιστικό της Ελλάδας - Εκτενή απάντηση στους μύθους που επικρατούν στο εξωτερικό για το ασφαλιστικό σύστημα της Ελλάδας

Der Tagespiegel link

Excerpts:

"Es mag unerhört erscheinen, dass 75 Prozent der Primärausgaben des griechischen Haushaltes für die Zahlung von Löhnen, Renten und Pensionen verwendet werden. Tatsache ist jedoch, dass davon gerade 30 Prozent für Renten und Pensionen anfallen. Lohnzahlungen stellen eine getrennte Kategorie dar, deren einfache Summierung einen bedeutenden methodologischen Fehler darstellt...

Renteneintrittsalter in Griechenland liegt bei 67 Jahren

Man muss nur die Grundrechenarten beherrschen, um zu erkennen, dass der Anstieg der im Verhältnis zum BIP eines Landes ausgedrückten Staatsausgaben für Renten und Pensionen ausschließlich aus dem Zusammenschrumpfen der Wirtschaftsleistung Griechenlands rührt und nicht aus der Erhöhung der vom griechischen Staat für die Zahlung von Renten und Pensionen aufgewandten Summen. Anders formuliert ergibt sich dieser Wert aus der Tatsache, dass das BIP Griechenlands viel schneller gesunken ist als die Renten.

Anders als behauptet wird, liegt das Renteneintrittsalter in Griechenland von Männern und Frauen bei 67 Jahren, in Deutschland bei 65 Jahren. Das durchschnittliche Alter, in dem Männer sich aus dem Arbeitsmarkt zurückziehen, liegt bei 64,4, für Frauen bei 64,5 Jahren. Die Werte liegen für deutsche Arbeitnehmer und Arbeitnehmerinnen bei 65,1 und 64,2 Jahren.

Es geht mir nicht darum, die Fehler und Verkrustungen unseres Rentensystems zu leugnen, sondern zu zeigen, dass die Probleme dieses Systems nicht aus dessen vermeintlicher Großzügigkeit rühren. Tatsache ist, dass die schwerwiegendsten Probleme der griechischen Rentenkassen aus dem dramatischen Einnahmerückgang der letzten Jahre resultieren.

*****

The Text in English

Prime Minister Alexis Tsipras:

"I’d like address a popular myth that the average German taxpayer has been led to believe.

Namely, that he is paying for the wages and pensions of the Greek people. This is absolutely false.

I don’t deny that our social security system has problems. But it’s important to point out the root of the problem and how it can be resolved. There were many cutbacks in recent years that only served to further the recession and make the problem even worse.

It may sound somewhat suspect that 75% of the primary expenditure is used to pay for salaries and pensions. If it sounds unbelievable—that’s because it is: only 30% of the primary expenditure concerns pensions. Moreover, it’s important to note that wages and pensions are not the same thing, and assessing them together is a serious methodological error.

The comparison with Germany’s pensions is also rather misleading. According to the Ageing Reports (2009, 2015), pension expenditure in Greece rose from 11.7% of GDP in 2007 (slightly higher than the 10.4% in Germany) and reached 16.2% in 2013 (while in Germany the numbers remained almost stable).

What caused this increase? Was it due to an increase in pensioners or an increase in pension amounts? The answer is: Neither. The number of pensioners has essentially remained unchanged and pensions have shrunk dramatically due to the implemented policies.

Simple arithmetic is sufficient to reach the conclusion that the increase in pension expenditure as a percentage of GDP is entirely due to a decline in GDP (denominator), and not to an increase in expenditure (the numerator). In other words, GDP declined faster than the pensions.

Concerning retirement ages, could it be that in Greece employees retire much younger?

The truth is that the retirement age in Greece is 67 years for men and women, i.e. two years more than in Germany.

The average exit age from the labor market for men in Greece is 64.4 years, i.e. eight months earlier than the 65.1 years in Germany, while Greek women retire at 64.5 years, about 3.5 months later than German women who retire at 64.2 years.

I wanted to highlight the above –again, not to deny the ailments of our social security system- but to prove that the problem is not one of supposed generous pensions.

The most significant disruption to the pension funds is due to dramatically lower revenues in recent years. These were caused by the loss of assets due to the PSI (haircut of Greek bonds held by the Pension Funds, totally approximately 25 billion euro) as well as – and most importantly – by the sharp drop in contributions that resulted from soaring unemployment, and the reduction in wages.

In particular, during the period 2010 – 2014, approximately 13 billion euro were removed from our social security system through a series of measures with a corresponding reduction in pensions and allowances at a rate of about 50%, a fact which has exhausted any margin for further reductions without undermining the operational core of the system.

Moreover, we must understand that the system is being mainly pressed on the revenue side and less so on expenditures, as is often implied.

I would also like to call attention a matter that is unique to the Greek crisis. The social security system is the institutionalized mechanism of intergenerational solidarity, and its sustainability is a main concern for society as a whole. Traditionally, this solidarity has meant that young people, through their contributions, fund the pensions of their parents. But during the Greek crisis, we’ve witnessed this solidarity being reversed as the parents’ pensions fund the survival of their children. The pensions of the elderly are often the last refuge for entire families that have only one or no member working in a country with 25% unemployment in the general population, and 50% among young people.

Faced with such a situation we cannot adopt the logic of blind and horizontal cuts, as some have asked us to do, which would result in dramatic social consequences.

On the other hand, we are not indifferent to the present condition of our social security system, and we are determined to ensure its sustainability.

The Greek government submitted specific proposals concerning the social security system’s reorganization. We agreed to the immediate abolition of the early retirement option that increases the average retirement age, and we are committed to moving forward immediately with the consolidation of the pension funds, thus reducing their operating expenses and restricting special arrangements.

As we analyzed in detail during our discussions with the institutions, these reforms function decisively in favor of the sustainability of the system. And like all reforms, their results will not be apparent from one day to another. Sustainability requires a long-term perspective and cannot be subject to narrow, short-term fiscal criteria (e.g. reducing expenditure by 1% of GDP in 2016).

Benjamin Disraeli used to say that there are three kinds of lies: lies, damned lies and statistics. Let us not allow an obsessive-compulsive use of indices to destroy the comprehensive agreement that we prepared over the previous period of intensive negotiations. The duty rests on all of our shoulders".
******

“The pension system looks unsustainable and needs reform,” said Guntram Wolff, director of the Brussels-based Bruegel group. “If you don’t reform it and want debt relief, you’re essentially asking your partners to fund an unsustainable pension system.” Bloomberg, May 20, 2015 (Greek Pensions Said to Be in Creditor Crosshairs)

Greek Pensions, Q and A, from The Economist 

A Greek paradox: many elderly are broke despite costly pensions, from Kathimerini, June 17, 2015

Creditor demands, 15 June, 2015, Enikos - This is what creditors demand of Greece on pensions.

Reuters, Lagarde, IMF - Greece faces IMF default on July 1 without a deal: IMF's Lagarde

"There is no grace period or two-month delay, as I have seen here and there," she said, speaking before a euro zone finance ministers meeting in Luxembourg. Lagarde said a reform of the Greek pension system was critical to sealing a deal with Athens, although small pensioners should be protected. "Everybody knows that. The Greek authorities know that as well. They have to address all sorts of issues," she said. "It is not a question of cutting the small pensions, but the program of financing the pensions has to hold," she said, adding that more than 16 percent of Greece's economic output went to pay pension benefits, which was "way more than the average, pretty much everywhere."

"Far from giving ground, Greek Prime Minister Alexis Tsipras launched a new attack on the lenders in an article in a German newspaper, slamming what he called their "blind insistence" on pension cuts he said would worsen his country's crisis". Reuters, June 18, 2015

Greek Pensions Laid Bare, Macropolis - "Greece’s pension system is taking centre stage again in the discussions with lenders. It should come as no surprise that even five years of programmes and repeated interventions have not managed to deal with the monster that was created after decades of mismanagement and a misled belief of entitlement".

From Svenska Dagbladet - "Lettlands finansminister Janis Reirs ser en "mycket stor" risk för att Grekland kommer att lämna eurosamarbetet. Det sade han i lettisk tv på torsdagen, enligt Bloomberg News. – För tillfället är denna sannolikhet mycket stor eftersom ministrarna inte är beredda att ge efter för Greklands ultimatum, sade Reirs inför eftermiddagens eurogruppsmöte. Han sade också att i dag, torsdag, är sista dagen att enas om ett nytt avtal för Grekland eftersom det i vissa länder krävs godkännande av parlamenten. Janis Reirs sade även att Grekland nästan inte har gjort någonting för att reformera ekonomin och han påpekade att grekiska pensioner och minimilöner är dubbelt så höga som de lettiska" ("Latvian Finance Minister Janis Reirs said that Greece has done almost nothing to reform the economy and he pointed out that Greek pensions and minimum wages are twice as high as the Latvian").

From MSN/capital.gr

Χθες μέσα από δηλώσεις τους στην Bild οι υπουργοί της Γερμανίας, του Βελγίου, της Λιθουανίας και της Σλοβενίας έδωσαν τον τόνο: καλούν την Ελλάδα να υλοποιήσει τις μεταρρυθμίσεις που έχουν συμφωνηθεί. Το θέμα είναι εάν η Ελλάδα quot;εκπληρώσει τις υποχρεώσεις της από το τρέχον πρόγραμμα quot;, δήλωσε ο κ. Σόιμπλε και πρόσθεσε ότι quot;μόνο σε αυτή τη βάση θα μπορούσαμε να αποδεσμεύσουμε διαθέσιμους πόρους quot;. Επισήμανε ότι ισχύει η αρχή: βοήθεια μόνο έναντι αντιπαροχών quot; και έκανε σαφές ότι πρέπει να παραμείνει το ΔΝΤ στο πρόγραμμα hellip;

From Bild

"Vor der Sitzung forderten mehrere Finanzminister die griechische Regierung zur Umsetzung der Reformen auf. Bundesfinanzminister Wolfgang Schäuble (72, CDU) verlangte gegenüber BILD, Athen müsse die „Verpflichtungen aus dem laufenden Programm“ erfüllen. „Nur auf dieser Grundlage könnten wir noch vorhandene Mittel freigeben. Es gilt das Prinzip: Hilfe nur gegen Gegenleistung.“

Belgiens Finanzminister Johan van Overtveldt (59) forderte, Athen müsse sich „an die Vereinbarungen halten und die Reformen verwirklichen, die im Programm vereinbart wurden“. Litauens Finanzminister Rimantas Sadzius (54) warnte gegenüber BILD vor dem Ausscheiden des IWF aus dem Hilfsprogramm".

More from Bild - VAROUFAKIS FREUT SICH ÜBER GEPLATZTEN GRIECHEN-GIPFEL

Kathimerini: Up to ten different pensions (2. 7.2014) - Και όμως, υπάρχουν 3 Έλληνες που παίρνουν 10 συντάξεις

"Whoever calls for further pension cuts, is a fanatic" - Tassos Koronakis (Der Spiegel). - "Wer weitere Rentenkürzungen fordert, ist ein Fanatiker", schimpfte Koronakis

There is a campaign to change the minds of German voters:

More on Greek Pensions from Der Spiegel - Die Mär vom griechischen Luxusrentner -" Griechen gehen mit 56 in Rente, Deutsche mit 64: So behaupten es deutsche Medien und Politiker. Das ist schlicht unwahr. Über die Bedeutung von Renten in einem Land, in dem die Armen nicht einen Cent Sozialhilfe bekommen".

Wall Street Journal blog - Greece’s pension system has become the main obstacle to a deal with its creditors. The leftist government in Athens is flatly refusing to cut pensions more. The eurozone and the International Monetary Fund say pensions for poorer Greeks should be protected, but they argue Greece can’t afford its overall system. Without a compromise on pensions, there’s no deal, no money for Greece, default, capital controls, and return of the drachma.

CNBC report - Why Greece's pensions are key to the debt deadlock - "Greece's pension system has become a major sticking point in the bailout talks between the country's far-left government and its international creditors, with Athens offering little concession on Brussels demands for its overhaul". 38COMMENTS

Real Time Brussels (WSJ)

From The Times - Tsipras: wife will leave if I surrender to Europe

Also from Greek Reporter