By Alexander Apostolides on May 25, 2010

Some of the insane demands on Greece

Although Greece is in a difficult situation, the demands by its would-be saviours are far and wide, extending far beyond the need for budget cuts.

The latest measures demanded by the coalition of lenders is a radical change of the pension plan of Greece. Although change is evidently needed, the demanded goals are far in excess of what exists in either Germany or even the United states. The Papadreou government is trying to mollify the changes, but it can do little as it is in not position to negotiate.

The demand for the pension system is that people can only retire in full pension after 40 (!) years of work. The pension they will get will be based on the average salary over their life time and not on the much higher final salary. In addition they will loose 6% for every year they work less than 40. As my wife pointed out, only the poor children selling tissues in the street of athens, who start work when they are 12 or 15, will be able to retire at a decent age.

The international lenders also demand an end to all collective wage negotiation, despite the fact such collective negotiation has been in the past very effective way in moderating wage demands. This will turn any protests in Greece ever more explosive, with the possibility of the shipping and hotel sector being crippled by strikes during the crucial summer period.

In addition the minimum wage is to be reduced from 740 euro to 600 euro and new employees could be saked without compensation for the first 18 months of employment.
A classic case of the cure being worse than the illness, A rapid default would have been better for Greece- it is now being forced to dismantle all of its welfare system, leaving most of the population worse off.

4 comments:

  1. Surely retirement on full pension at 60 is perfectly reasonable in almost all European countries, and most countries are raising the retirement age above 65. Greece's existing system is completely unsustainable, all the IMF is doing is stating the obvious. Or have I misunderstood your point?

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  2. The issue is that Greece has a high proportion of youth unemployment a system of education that takes 4-6 years for a Bachelor degree and a year of military service. Thus it is very difficult for young people to be in employment before they are 30... which means full average salary pension when you are 70... considering that starting salary is going to be reduced to 600 euro you can begin to see the problems.

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  3. Alex - the education system will also need to be changed as part of the overhaul. It is entirely unacceptable for an individual to spend 6 years for a bachelor degree (twice as much as the UK, say), start work at 30, and then retire at 50, It would entail a working life of 20 years, and then being supported by the state for 30. How can that ever be made sustainable?

    The average greek finishes high school at 18, plus one year in the army, plus 4 years in the university = 23. This means by the time they are 63 they will have already worked for 40 years. The entire world is doing it, why cant the Greeks? How is it that it can be fair for an individual to demand to contribute to a social fund for 20 years, and then expect to be supported for 30?

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  4. What you seem to forget is that the Greek university system is a welfare blanket for the young who would be unemployed if not studying. Many people work and use the free food and (almost free) transport offered by being in a university to maintain a pretty poor but bearable standard of living. If this was not in place then Greece would almost surely have higher unemployment among the young than Spain, which has the highest in Europe.

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