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Greece Implements Pension Reforms
Submitted by Leo Kolivakis, publisher of Pension Pulse.
John Hadoulis of AFP reports that Greece hikes pension age, calls for bonus cuts:
Greece's
government on Tuesday unveiled a hike in the average retirement age and
called on striking civil servants to accept bonus cuts to pull the
country out of an unprecedented financial crisis.
Labour Minister
Andreas Loverdos said men and women will retire at 63 on average in a
bid to save Greece's cash-strapped pensions system, as other ministers
met for a second day to finalise the country's new tax policy."There
will be a two-year increase of the limits on the average rate of
retirement... namely 63 years on average for men and women by 2015,"
Labour Minister Andreas Loverdos told reporters after a ministry
meeting.
"We are changing the pensions system in order to keep it alive," he said.
The
maximum retirement rate is currently 65 for men and 60 for women, and
Greece is under pressure by the European Union to bridge the gap.
The minister also pledged to bring an end to voluntary retirement schemes that have cost the cash-strapped state dearly.
The
pension reform is part of a cost-cutting plan by Greece's hard-pressed
Socialist government which is struggling to slash a debt mountain
expected to hit over 290 billion euros (396 billion dollars) this year.
Loverdos
is trying to save 4.5 billion euros (six billion euros) this year from
a social budget burdened by years of mismanaged spending by social
funds on medicine and hospital bills.
Greece's main private
sector union GSEE is staging a nationwide strike on February 24 in
opposition to the pension reform. Thousands of civil servants targeted
for bonus cuts are holding another one-day strike on Wednesday.
GSEE
chairman Yiannis Panagopoulos on Tuesday said the minister's statements
were "vague" as they made no reference to the maximum age of retirement."When
the government presents its full proposals in a bill, we will discuss
them and fight to improve them if necessary," he told private Flash
Radio.
But he welcomed the scrapping of voluntary retirement
schemes, saying it was "provocative to have miners crawling into holes
at the age of 65 and to see other categories retiring after 25 years of
work."
The government is trying to prevent this month's
industrial action from undermining efforts to jumpstart the
recession-mired economy.
The cabinet is meeting for a second day
Tuesday to finalise a tax overhaul aimed at netting around five billion
euros this year and help plug a budget deficit that hit over 30 billion
euros in 2009.
Greek Prime Minister George Papandreou late Monday
asked civil servants to accept bonus cuts saying they "must be the
first to set an example."
Wednesday's civil servant strike will
paralyse ministries, local administration and tax offices. Air traffic
controllers are also joining the protest.
Greece's 12.7-percent
deficit is beyond EU limits of three percent of output for eurozone
members, and it suffered a triple downgrade of its sovereign debt in
December.
Despite assurances from the European Union and the
European Central Bank, markets suspect that the government will not be
able to enforce the painful reforms promised.
Socialist
cadres are already expressing misgivings about the plan according to
press reports, but a majority of Greeks appear to support the
government.
The European Commission last month rubber-stamped a three-year Greek crisis plan presented by the government.
But
the European Union executive arm also placed Greece under a permanent
system of monitoring -- a first for the EU -- and rapped Athens over
faulty budgetary data tabled by the previous conservative government
ousted in October.
Greece doesn't have a
choice but to implement pension reforms. And pension tension isn't a
problem unique to Greece. Here in Canada, former Nortel employees will
face big cuts to pensions, health care, disability coverage and other
benefits later this year under a $57-million deal with the insolvent company.
In
the UK, the BBC reports that according to the the Pension Protection
Fund (PPF), the deficit in final salary pension schemes in the private
sector hit £52bn in January, up from £33bn in December.
In
New Jersey, legislation requiring public workers to assume a portion of
their health benefits costs and providing relief to the beleaguered
state pension system has been introduced:
The
package of bills introduced Monday follows vows by new Democratic
leaders in the state Senate to revisit pension reform recommendations
made four years ago but mostly ignored.
"Unless
we take action now, New Jersey's pension system will implode, leaving
thousands of rank and file workers penniless in retirement," Senate
President Steve Sweeney said during a news conference on pension
reforms two weeks ago.One
bill requires state, local and school district workers to contribute at
least 1.5 percent of their salary toward their health care costs.
Another caps at $15,000 the amount of unused sick time that can be
cashed in at retirement.
A
third bill repeals the 9 percent pension benefit increase put in place
in 2001 by changing the way pensions are calculated. The last bill in
the package requires the state to make its annual payment to the
pension system, not skip it or short it, as has been the custom in
recent years.
No figures were immediately available on the potential savings.
Most
of the proposals would affect new hires, not those already in the
pension system. However, the measure requiring public workers to
contribute toward their health care costs would take effect when their
current contract expires.
The pension system is underfunded by about $34 billion and is in danger of becoming insolvent unless fixes are made.
As you read this comment, remember that what's happening in Greece is
emblematic of what's plaguing most developed countries, albeit in
varying degrees. Pension woes are not going away, will get worse over
the next decade, and will undoubtedly require tough choices and
compromises ahead by all stakeholders.
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It's strange that people would think the Federal Gov't would bail out states who don't require their employees to contribute to medical plans (Federal employees do) and who struggle attempting to cap saleable sick hours (Federal employees may carry/sell no more than 240 hrs of annual leave - zero sick time is saleable). Until the states adopt the more stringent benefits scheme of the Federal Gov't, they shouldn't look to it as Bond Bailsman.
It's all part of the great wealth illusion. We over estimate our assets and underestimate our liabilities. In this case the illustration of the affluence of western societies is the fabulous pensions we can offer to our workers, but the problem is that an unfunded pension is nothing more than a Ponzi scheme, reliant upon the payments of later members to fund the obligations to the earlier ones. As we face the reality of an aging population (both fewer youth and longer living elderly) the day of reckoning is approaching.
Our societies are not productive enough to cover these generous entitlements, but people have lived and worked on the assumption this would be due them, so some people are going to be very disappointed, to say the least.
Are you still bullish on stocks? If so, I'm curious as to why. Another solid article.
Those of you who want to track the US and global pension tsunami more closely, should visit Jack Dean's excellent site:
http://www.pensiontsunami.com/
Greece is the word.
The reforms are needed. But that's not the problem.
As austerity is pushed onto the people and as the shenanigans of the power elite keep cropping up, a whole bunch of people are going to be very unhappy; and if they are hungry and homeless to boot, then yes, that is a likely recipe for revolution...
I know it, you know it too and so do some of our leaders.
Before that happens, they'll plunge us into a world war. Been done before. Absolutely no reason why it should not be done again.
Western politicians are not about to admit that they are no more righteous than your garden variety Mugabe. So war it is I am afraid.
Leo is doing a very valuable service to us highlighting this issue. The massive coming crisis in pension schemes is going to create enormous social tension all over. In fact, it may be the issue that finally slows runaway government spending and breaks California. Or more likely, it will catalyze a Federal bailout of the states.
It may also have the collateral effect of raising awareness among taxpayers as to exactly how badly they have been screwed in this crisis. Many are unemployed with dwindling benefits whilst policemen retire on huge pensions. This will enrage older voters. Recent polls show that young people would rather have easy government jobs than take private-sector risks. It all crushes the spirit of enterprise.
I predict much more anger.
>>>>Here in Canada, former Nortel employees will face big cuts to pensions, health care, disability coverage and other benefits later this year under a $57-million deal with the insolvent company.<<<<<
Yes Leo but another $200 million of my tax dollars are going in to the Pension Guaranty Fund to help Nortel emplyees. So billions went to the auto workers, $85 million to teachers and now $200 million to help pensioners from a private company that has gone broke. Any money going to rest of us with our own retirement funds?
This is just political crap buying votes at the expense of tax payers in my opinion.
Why is it when a government is reneging on promises it made to its citizens, or is about to change a system to fuck the taxpayers even more, they call it "reform"? Why don't they call it what it is?
"Greece reneges on promises it should never have made, skull-fucks citizens".
Didn't Argentina implement pension reform a few years ago?
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/20/AR200811...
...unexpectedly...
Shouldn't they also raise taxes?
?????????? ???? !!!
Until the current system of lobbyists and corporate thieves is a pile of bloody corpses there is no end in sight. If you think along the lines of a happier ending you are the spineless problem and don't deserve to be called an American.
Vote out the bums and take your states and nation back you Wall Street wannabe's (pussies)!
Torch it to the ground before someone else does where you end up with not even the ashes.
Leo you are a coward.
Until this system is reformed it will fail again and again, exactly as it is designed.
Instead of being a trader/thief why don't you act like an American and quit promoting the theft in the name of "trading"
If a contracted bonus is held as valid for bankrupt AIG then state committed retirement programs are at a minimum equally, if not superior to any such claims from "private enterprise" operating under state sponsorship. Keep your commitments or the cops and firefighters may not show up when you call.
What are "cops?"
Don't be a fool, there is no enforcement in finance. Finance is the business of choice for the mafia (spare the the rebuttals on market legitimacy from the panzy trader's perspectives).
I thought there was intelligence on this forum, but all it is is a bunch of weak citizens spouting on about nothing while their governments steam-roller every foundation in what's left of the States of Corporate America.
Bonuses for failure - yeah that sure seems legitimate.
Cops, just like firefighters go where they are sent. I would hope that a citizen who desires to avail themselves of the shield of anonymity would understand the basic precepts of governance as it is presently applied. The leaders of American government used the 9-11 attacks as a means of reducing the footprint of law enforcement within the area of financial terrorism, where the real money is made in order to turn the immense capabilities of national technical means against their own citizens. Where have you been, besides hiding behind the mask of anonymity?
Returning to this effort by Leo I am sure that there are many within the Greek civil service and the society that either they serve or whom many believe have grown accustomed to the idea that society is there to serve them with the concept that it is upon their shoulders that the government is calling for sacrifices. I suspect that the Greek civil service will call upon a greater distribution of pain to those that are best able to shoulder it. Those that have profited handsomely at the opportunities Greek society has offered many. Most notably, those who are held above national concerns and prerogatives, or even international propriety who now actively trade national and indeed regional fiscal demise for fun and profit.
A fat bonus payday for "success" - Sure seems appropriate to me...
Time to load up on Smith & Wesson.
And support your local volunteer fire company...
And no story on the Pension Holocaust is complete without mention of CalPers.
In the past 10 years, the State's annual payout into CalPers has gone from $ 159 million to over $ 3.5 billion. State revenues are up just 26 % in that period. That amount doesn't even include the city, county and municipality growth in annual liability ( many are falling way behind on their payments due to CalPers ).
Every day there are editorials in local CA newspapers SCREAMING for electeds to craft solutions to the looming public pension disaster.
So Pensions, public and private, and Social Security are underfunded. Meanwhile debt loads are still obsenely high. This means stocks will go up, right?
I'm afraid this is going to end in violence.
Agreed.
Civil war.
Man the lifeboats....
Surely differential pension ages is sexist under european human rights legislation anyway. Some guy should sue.