Greece Shows What Happens When The Welfare Ponzi Ends

Tyler Durden's picture


When no more money flows in, to fund outflows, then the jig is up for the pension fund ponzi. This, as evidenced by the 'punching, kicking, and tearing at clothes' that a Greek pension fund manager endured recently, is exactly what has begun in Greece. As Reuters reports, the fund manager "enraged" here audience when she asked the Greek journalists to 'double their contributions' to their social security fund, and spent the night in hospital for her efforts to keep the ponzi alive. It was a brutal sign of the fury many Greeks feel at the way the country's debt crisis has dashed hopes of a comfortable old age. As New Democracy's leader noted: "From July 2010 it was obvious that a debt restructuring would be inevitable. While foreign banks were unloading their Greek government bonds, no one moved to tell Greek pension funds to do something, that a haircut was coming." Under a law passed in 1997 and refined in 2007, pension funds have to place 77% of any surplus cash in a pool of 'common capital' which must be invested only in Greek government bonds or Treasury bills (T-bills). So the PSI saved German and French banks but crushed Greek pensioners...


Via Reuters:



For hours the leader of the Greek journalists' social security fund had been chairing a meeting about disastrous losses on retirement savings caused by the country's economic collapse. "She tried to present herself as the fund's savior and asked (members) to double contributions to 6 percent of salaries," said one of those present that night at the Titania hotel. Spanopoulou, 58, did not succeed.


When she rose to leave around midnight, enraged fund members first swore, then waded in punching, kicking and tearing at her clothes, according to witnesses. A bodyguard managed to bustle her out of the room, but another group caught her just outside the hotel and gave her a second beating. She spent the night in hospital.


It was a brutal sign of the fury many Greeks feel at the way the country's debt crisis has dashed hopes of a comfortable old age. Greece's pension funds - patchily run in the first place, say unionists and some politicians - have been savaged by austerity and the terms of the international bailout keeping the country afloat.




Many savers blame the debacle on the Bank of Greece, the country's central bank, which administers three-quarters of pension funds' surplus cash.




Prokopis Pavlopoulos, a lawmaker in the ruling coalition's conservative New Democracy party and former interior minister, said: "From July 2010 it was obvious that a debt restructuring would be inevitable. While foreign banks were unloading their Greek government bonds, no one moved to tell Greek pension funds to do something, that a haircut was coming."




The losses compound the woes of Greek pensioners, many of whom have seen their income fall; further cuts are expected as part of the latest austerity package voted through parliament in November.


The Bank of Greece rejects the criticism, arguing its room for maneuver was limited. ...


... "The government ... knew it was heading for a haircut and did nothing for these people, which I find hard to stomach."






Under a law passed in 1997 and refined in 2007, pension funds have to place 77 percent of any surplus cash in a pool of "common capital" managed by the Bank of Greece. The law requires the common capital to be invested only in Greek government bonds or Treasury bills (T-bills). The remaining 23 percent of funds can be invested in other assets, such as mutual funds, shares and real estate.


The aim of the measures, officials said, was to ensure that most of the money was safely tucked away for a steady return. In the good times, this worked. But it was to have disastrous consequences when the credit crunch that began in 2007 led to a crisis in sovereign debt.




Amid the wrangling over exactly who bought what when, one thing is clear: when the financial storm struck, the pension funds remained heavily exposed.




In the end, however, the pension funds appear to have suffered an even bigger loss.




Former Labour Minister George Koutroumanis told Reuters the losses were unavoidable. "How could we have asked to protect our own pension funds and let all the others take the blow, it could not have worked that way," said Koutroumanis, whose former department is in charge of the pension system. "The billions of euros that pension funds lost because of the PSI was a significant hit. But it has to be weighed against the need to ensure the viability of the country in the euro and the system's continued funding."




... Konstantinos Amoutzias, president of the bank's employee union. "We have asked the Bank of Greece since the summer to provide us with data on the investment of our funds and they haven't answered us yet."


A senior Bank of Greece official, who declined to be named, said: "Any fund which has asked for data on transactions and market prices has received it." He added that, for reasons of legal confidentiality, the central bank could not reveal full details, such as the names of the banks from which it had bought government bonds in the secondary market.


Vaso Voyatzoglou, secretary general of insurance at the bank employees' union OTOE, said: "Eventually all pension funds will end up suing the Bank of Greece in order to find out what exactly happened and how they lost their money."






"We should not have illusions that our pension fund will recoup what it lost from the haircut on its government bond holdings," he said. "It's very hard to get by as a pensioner the way things are going."




Many pensioners have to get by on less, including Yorgos Vagelakos, a 75-year-old former factory worker, and his wife, who live in Keratsini, a working-class district near Athens. "We can barely afford to buy our grandchildren anything, not even a colorful notepad. When they ask us for one, we change the subject and then we cry," Vagelakos said in the tiny yard of his house.


His pension of 650 euros a month supports himself, his wife Anna and, when possible, the family of his 42-year old-son, who is unemployed. "Thankfully my younger son and his wife have a job," he said.


Tax increases and high prices have hit hard. "We have slashed everything by 50 percent. At night we keep the light off to save on our electricity bill. We have become vegetarians from cutting back. We can't take it anymore," Vagelakos said, talking while his wife cooked cauliflower and potatoes for lunch, a meal that would also feed the family of their elder son, who has two children.



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Fri, 11/30/2012 - 12:21 | 3023824 AnAnonymous
AnAnonymous's picture

And 'americans' and wealth to steal.

Fri, 11/30/2012 - 12:36 | 3023916 prains
prains's picture

And AnAnlogous and his Anus

Fri, 11/30/2012 - 14:55 | 3024406 TheFourthStooge-ing
TheFourthStooge-ing's picture

And Chinese citizenism hypocritizen AnAnonymous and a dog he is planning to wok.

Fri, 11/30/2012 - 10:29 | 3023424 WesternFront
WesternFront's picture

Look around your neighborhood.  Are they the type that can sustain a prolonged scenario such as this?  If not, shouldn't you be moving?

Fri, 11/30/2012 - 10:31 | 3023427 Bastiat
Bastiat's picture

A preview of what's coming for US 401s after they are forced into T- paper.


Fri, 11/30/2012 - 10:32 | 3023435 I am Jobe
I am Jobe's picture

Sheeples still beleive in 401K's. As long as the inbreeding continues 401K's will survive.


Fri, 11/30/2012 - 10:33 | 3023436 Joe Davola
Joe Davola's picture

OK, I owe you a Coke.

Fri, 11/30/2012 - 10:36 | 3023448 Winston Churchill
Winston Churchill's picture


But the US sheeple will be led to slaughter trusting Uncle Sam to the last breath.

Fri, 11/30/2012 - 10:37 | 3023450 Cursive
Cursive's picture


I think long only 401k's are going to feel it, but not like the pensioners.  The pensions will be the first to go.  How many SEIU and state teacher union memebers are relying on that pension?

Fri, 11/30/2012 - 10:58 | 3023543 forwardho
forwardho's picture

Bastiat, T-paper, may I assume the pun was intended? Somehow I think the actual roll will have more value.

Fri, 11/30/2012 - 10:32 | 3023433 Joe Davola
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Under a law passed in 1997 and refined in 2007, pension funds have to place 77% of any surplus cash in a pool of 'common capital' which must be invested only in Greek government bonds or Treasury bills (T-bills)


Coming soon, to a 401k near you!

Fri, 11/30/2012 - 10:44 | 3023479 youngman
youngman's picture

And I bet Goldman sold them to a good commission too

Fri, 11/30/2012 - 10:47 | 3023494 astoriajoe
astoriajoe's picture

correct me if I'm wrong, but doesn't 100% of social security "funds" go into treasuries of one duration or another?

Fri, 11/30/2012 - 10:51 | 3023513 Dr. Richard Head
Dr. Richard Head's picture

Flight to safety, no?  HAHAHAHAHAHAHAHAHAHAHAHH.........burp.

Fri, 11/30/2012 - 10:35 | 3023446 wagthetails
wagthetails's picture

and these were pacifist elitist acemedic journalists....just imagine when they tell the cops the same thing. 

This is when our country will finally be woken up....those pensions aren't there. 

Fri, 11/30/2012 - 11:02 | 3023549 MrPalladium
MrPalladium's picture

Bingo!! Bingissimo!!

Fri, 11/30/2012 - 10:43 | 3023467 Dr. Engali
Dr. Engali's picture

It's going to get real interesting as this debt monster works it's way up the food chain. Nationalization of your 401k's and IRA's are coming up.

Fri, 11/30/2012 - 10:43 | 3023475 ghengis86
ghengis86's picture

Wake me up when the bankers are getting beat to shit and spending nights in hospitals. The people's rage is good, just need to work on their trajectory a little bit.

Fri, 11/30/2012 - 10:46 | 3023486 Seasmoke
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I am going to home school my kids. When the public leeches find out their pensions are just a mirage , they will probably hold the children for ransoms. Or maybe just have sex with them. Either way it ain't going to be pretty.

Fri, 11/30/2012 - 11:40 | 3023680 shovelhead
shovelhead's picture

Well, they wanted sex education in schools...Why complain?

Fri, 11/30/2012 - 10:47 | 3023488 toomanyfakecons...
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Greece should loosen up their gun laws and start manufacturing firearms... instant cashflow.

Fri, 11/30/2012 - 12:23 | 3023835 AnAnonymous
AnAnonymous's picture

Some other 'american' nations have such an oversupply of that stuff, it wont work.

Fri, 11/30/2012 - 11:24 | 3023490 DaveyJones
DaveyJones's picture

Something sickly poetic about the teardown of society starting in Greece

Fri, 11/30/2012 - 10:48 | 3023502 adr
adr's picture

You mean people getting paid back more than they put in isn't sustainable? There is a problem with paying people who no longer work?

My uncle is getting $70k a year plus benefits from his pension after retiring as a teacher last year. I asked him if he thought the district could continue to pay for him and all the other retired teachers and still pay actual working teachers. I didn't get a very nice answer. The worst part is many teachers are retiring with their pensions and still working as substitutes, effectively double dipping.

Many young teachers are lucky to get paid $30k, if they can even get hired. Most school districts have resorted to full time substitutes. One retired teacher's pension can pay for two full time teachers. When you add the medical expenses of the retired, the picture even gets worse.

40% of my town's revenue goes to pay for the pensions and benefits of retired public workers. THAT IS INSANE. A problem set to only get worse as a large percentage of cops and teachers are set to retire over the next few years. Soon over half of my local tax dollars will be going to pay people who no longer work, meaning real services will not be paid for. It isn't any different with my state and federal taxes either.

Fri, 11/30/2012 - 11:13 | 3023584 Dapper Dan
Dapper Dan's picture

Add this to the mix and we have a real problem houston,

US births dip to lowest ever recorded

The birth rate in the United States dipped to a record low in 2011, led by a steep fall in children born to immigrant women, says a new report from the Pew Research Center in Washington, released on Thursday.

The report uses preliminary figures for 2011 from the National Center for Health Statistics that show the overall birth rate in the US was 63.2 per 1,000 women of child-bearing age.

According to Pew, that rate is the lowest since at least 1920, the earliest year with reliable records.

Foreign-Born Women Showing Biggest Fall In Birth Rate

Fri, 11/30/2012 - 11:21 | 3023615 dolph9
dolph9's picture

Back when I was a med student in 2005 the Hispanic ladies in Texas were pumping out kids like there was no tomorrow.

I haven't been through the maternity wards recently so I can't say if this has changed or not, but it's possible.

Fri, 11/30/2012 - 11:25 | 3023630 aerojet
aerojet's picture

Can't speak for the illegals producing anchor youth, but most maternity wards are facing a pretty sizeable slowdown.

Fri, 11/30/2012 - 11:24 | 3023626 aerojet
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Which is actually good news--not for pensioners, but for the world.  We cannot have an ever-increasing birth rate on this planet.

Fri, 11/30/2012 - 11:23 | 3023618 aerojet
aerojet's picture

You're right it is insane.  It is all vote-buying gone bad later.  The real problem right now is that it is about to get orders of magnitude worse--we're still at the forefront of the massive retirement tsunami that is about to hit full force.  There is absolutely no possible way that any town, city, county, state, or federal entity can continue to operate and meet their pension obligations.  Well, there's probably a few exceptions to what I just said--any city or county that already defaulted.  But my point is that all of these end up in the PBGC or whatever that federal agency is called--but they're just the final domino, kind of like Fannie Mae and Freddie Mac, who absorbed all the bad mortgages so the banks could pretend to be solvent for a couple more years.

Fri, 11/30/2012 - 10:48 | 3023503 scatterbrains
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" Under a law passed in 1997 and refined in 2007, pension funds have to place 77% of any surplus cash in a pool of 'common capital' which must be invested only in Greek government bonds or Treasury bills (T-bills)"

Honest question here..  Why hasn't the author/authors of this legislation not been hunted down, bled out and dragged through the streets of Athens yet ? Sorry but Greeks are pussies.

Fri, 11/30/2012 - 11:51 | 3023717 three chord sloth
three chord sloth's picture

The authors of this legislation are still seen as the good guys. They are the ones who promised long, prosperous retirements, bought at a discount, and guaranteed by the state. And that is what the average Greek (or American or Brit or German or Jap) wants.

Turning on the original authors means abandoning the dream of an easy, guaranteed retirement paid for by magic. The average person cannot accept that they've been fooled so easily, so deeply, so profoundly. They want only one thing... those old promises to come back, and that is the one thing they can never have. So they will continue to act as if something real was stolen from them today, rather than accept that is was all a pretty lie from the beginning.

Fri, 11/30/2012 - 10:50 | 3023511 Seasmoke
Seasmoke's picture

I will take whatever it is that comes. As long as I get to see the faces of every thug in a costume with a badge, when they are told its all gone.

Fri, 11/30/2012 - 10:51 | 3023514 forwardho
forwardho's picture

My Grand-pa told me, when i was but a lad, that in this world there aint no such thing as getting something for nothing. I have found this to be true. To think you can work for 20-25 years and then expect to get paid for another 40 is naught but a collective fantasy. Math is math, and a promise is in no way a guaranty.

Fri, 11/30/2012 - 10:53 | 3023523 Cone of Uncertainty
Cone of Uncertainty's picture

Greeks are still at the anger phase of Kubler Ross.

Why anyone would try and reason with anyone from the populace at this point is beyond me, its like entering a lions cage wrapped in a meat jacket.

She's lucky to still be alive.

Fri, 11/30/2012 - 11:04 | 3023557 Sandmann
Sandmann's picture

Americans are still in Stage One = Denial

Fri, 11/30/2012 - 12:54 | 3023986 Essential Nexus
Essential Nexus's picture

I wonder how many make it to acceptance.

Fri, 11/30/2012 - 10:54 | 3023527 aerojet
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"See, their morals, their "code"... it's a bad joke, dropped at the first sign of trouble. They're only as good as the world allows them to be. I'll show you. When the chips are down, these uh, these "civilized people," they'll eat each other."

There's no honor between thieves, never was...

Fri, 11/30/2012 - 10:56 | 3023535 batz
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As soon as these people isolate their creditors into an identifiable group, it's going to get ugly.

The point of having convoluted securities is to spread the risk around the system so that no single group can be revolted against. The question becomes, with whom does the buck stop? If these people cannot isolate their creditors, then they will isolate the enforcers. The danger that Golden Dawn poses is that they are distributing food, which decouples it from the encumbered legitimate economy in which the creditors exist. People can become more free by joining the black market. The only thing worth fighting for in Greece right now is control of that black market.

There is a real threat that the Greeks could turn around and stick it to Europe and offer food and stability to anyone willing to defend it from its creditors. It can pay for food imports by licensing blackmarket activities through its ports, via drugs and weapons. The alternative is a blockade by the rest of Europe.



Fri, 11/30/2012 - 12:25 | 3023852 AnAnonymous
AnAnonymous's picture

Best. Why Hollywood moves are not that quality?

Best fantasy is to be found when 'americans' mean to be serious.

Misallocation of resources?

Fri, 11/30/2012 - 10:57 | 3023536 Seasmoke
Seasmoke's picture

I think that now alot of the public leeches have started to hit their 25 year mark or whatever number they colluded to make it, the Pension Ponzi is now been exposed and its a mad rush to the exits which only speeds up the collapse. Every leech for themselves !

Fri, 11/30/2012 - 10:57 | 3023537 surf0766
surf0766's picture

Not in Amerika. We welcome and expand the welfare ponzi at every crisis.

Fri, 11/30/2012 - 10:57 | 3023540 skipjack
skipjack's picture

Greece gets what it deserves by foisting democracy onto us.  The definition of democracy - 2 wolves and 1 sheep deciding what's for dinner.

Fri, 11/30/2012 - 11:03 | 3023556 Sandmann
Sandmann's picture

Their "democracy" was city-state based and only for Freemen not Slaves. It was Americans who had the weird notion that : -

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

and decided their version of "democracy" was more valid....... after all Greece was a Muslim Colony for most of its history until 1821 and a so-called democracy only from 1974

Fri, 11/30/2012 - 12:29 | 3023876 AnAnonymous
AnAnonymous's picture

Nah. The dimension added by 'americanism' was duplicity.

Greeks did not deny that they were slavers.

But 'americans' oversaw the potential of hijacking humanity on the pretense of their natural theory.

Ancient Greeks: slavers who did not deny they were slavers.

'Americans': slavers who denied they were slavers, and invented their natural theory stuff to legitimate all the massive stealth, all the invasions they were about to make.

Fri, 11/30/2012 - 11:39 | 3023674 OneTinSoldier66
OneTinSoldier66's picture

Not sure what you're talking about. As soon as I realized what democracy is(which I actually realized for most of my life), no more democracy was to be found in me. Greece had nothing to do with it. It all came from being able to think for myself, regardless of what anyone else was trying to foist around.

Fri, 11/30/2012 - 11:53 | 3023721 hooligan2009
hooligan2009's picture

the US is not a democracy, it is a republic - democracies fit your analogy of woves plus sheep.

the US is turning into a welfare based mobocracy, because it has turned its back on its constitution.

Fri, 11/30/2012 - 10:59 | 3023544 semperfi
semperfi's picture

"So the PSI saved German and French banks but crushed Greek pensioners..."

Greeks are well known for taking it in the ass.

Soon, Americans will be too.

Fri, 11/30/2012 - 11:05 | 3023565 Sandmann
Sandmann's picture

The game is whatever money you have THEY will take under whatever pretext THEY need. Call it Taxes, call it Pensions, call it Interest, call it Rent - THEY will take it and you will not see it again until THEY come back for more

Fri, 11/30/2012 - 11:15 | 3023596 dolph9
dolph9's picture

If this is how laid back Mediterranean Greeks respond, how do you think the ghetto dwellers of America are going to take it?

Not well, I suspect.

But then again, it's possible Americans are forever dedicated to keep on giving and giving to prevent the riots.

So keep on punching that alarm clock and paying those taxes, bitchez!

Fri, 11/30/2012 - 11:47 | 3023704 hooligan2009
hooligan2009's picture

i think the scheme is equiavlent to a 401k that was compelled to hold us treasuries...rather like the lifestyle choice funds owned by the large fund managers like Fidelity in the US. not much difference in the umbrella's, but i think the greeks who had invested were amongst the top 20% of the country, not the bottom 20% in chicago, NY and LA (who dont save at all and whpo the government only has to issue treasuries for - and then write down to zero - come the time of their need for pension money in retirement.)

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