BUSINESS

Greece spends 16.2 pct of GDP on pensions

By Roula Salourou

Greece will remain among the countries with the highest pensions in Europe over the next four decades if reforms concerning the level of pensions and the age of retirement are implemented, according to a European Commission report.

The Commission’s 2015 Aging Report was released this week – just as the government is hoping to avoid committing itself to concessions to its creditors regarding the social security system – and highlights two main issues concerning Greece: first, that a great deal of work has been done whose results will become evident in the years to come, and, second, that more has to be done as the drop in the birthrate, the increase in life expectancy and the comparatively low average age of retirement are keeping pensions expenditure at a significantly high level.

The EU report notes that of all 28 member-states, Greece spends the highest proportion of its gross domestic product on pensions, amounting to 16.2 percent. Through interventions made to the social security system over the last five years, according to projections, it will have managed to cut its expenditure by almost 2 percentage points of GDP by 2060. This will be one of the biggest declines, after Croatia’s (-3.9 percent), Malta’s (-3.2 percent) and Denmark’s (-3.1 percent), but Greece will still rank as the country with the third-highest rates in the EU in 45 years’ time, on 14.3 percent, unless fresh measures are introduced.

Like most European countries, Greece is aging and the Commission notes that while one in every five citizens was aged over 65 in 2013, the rate will be one in every four in 2030, while in 2060 one in every three Greeks will be 65 or older.

The report found that Greece had a poor starting point in terms of average retirement age too, as both men and women retire on average before their 62nd birthday. However, the interventions already implemented will have a significant impact. The biggest increase in the retirement age will be achieved in 2020, and in 2050 the country will have one of the highest actual retirement levels in Europe, at 67.3 years.

A significant contribution to the above fact comes from a clause that links the retirement age with life expectancy and automatically determines the increase in the age.

Another result of the recent reforms in the Greek social security system is the fact that the share of people aged between 55 and 64 years in the labor market will rise from 8.1 percent in 2013 to 19 percent in 2020 and to 25.6 percent in 2035 before going down to 21.5 percent by 2060.

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