Bank of Greece Governor Yannis Stournaras argued on Wednesday that Greek pensions are too high and should be slashed in order to cut social security costs and improve the country’s finances in general, while urging the government to complete the first bailout review as soon as possible as “with every hour the review is delayed, the mood darkens.”
Addressing Parliament’s Financial Affairs Committee, the central banker also said that an environment of political stability and social consensus needs to be created, and warned of the risks posed by the growth of the immigration problem to Greece in particular.
“Greece pays out high pensions,” said Stournaras, citing data compiled by the Organization for Economic Cooperation and Development (OECD) and referring to main and auxiliary pensions and retirement lump sum payments.
“In Greece we overprotect our pensioners at the expense of the younger generations. We have huge expenditure on pensions, which diminishes our potential in terms of the unemployed, training and family benefits. No one wants to see pensions reduced, but on the other hand we have to choose the level that will have the smallest cost for the entire society,” stated the central banker.
He went on to stress that wrapping up the first review of the bailout program is key to restoring confidence in the Greek economy: “The first review must be completed as soon as possible. This will strengthen confidence and encourage the return of bank deposits,” Stournaras said.
He also predicted that the Greek economy will recover in the second half of the year, admitting, however, that the forecast was dependent on the elimination of uncertainty. “We have to avoid the mistakes of the past which only led to dead ends,” the central banker and former finance minister said.
He further cited the example of Cyprus, “which will exit the bailout process before we do,” thanks to the political and social consensus achieved, and noted that the cost to Greece from the immigration problem will run up to 600 million euros in 2016 alone.