Pension Reform in Greece: ‘Reform by Instalments’ – A Blocked Process?
J.M. Keynes wrote ‘Practical men who believe themselves to be quite exempt from any intellectual inﬂuences, are usually the slaves of some defunct economist’ (Keynes 1936: 383).1 This was intended as indirect praise for those clear-sighted economists who were independent enough to set the agenda for policy. In the case of pension reform in the face of ageing societies, until very
recently two generalisations could be said to set the scene for the interplay of politics and economics: on the side of economists, near unanimity on the necessity of reform, as well as on the characteristics of (at least a core set of) prescriptions; on the side of policy (the practical men and the politicians), a determined immobility. In many European countries since the 1980s, pension reform has been continually just on the verge of being implemented. In the conﬂict between the clear-sighted economists and the politicians, it seemed as though the politicians were both setting the pace and deciding the agenda. Keynes’ dictum could be turned on its head: economists were the slaves of defunct and irrational politicians. This paper focuses on Greece: a pension reform aiming to consolidate the
extremely fragmented public system and to encourage longer contribution periods has been on the agenda continuously and frequently as ‘an urgent
matter’ for the last half-century, since the mid-1950s.2 The fact that the agenda for the next four years remains largely identical makes Greece an extreme – and therefore interesting – case of the phenomenon of pension reform delays. This paper attempts to characterise and explain the persistence of delays as arising from key structural features of the Greek pension system. These characteristics, chief amongst which is fragmentation, set the scene
for a political economy of reform which in the absence of external shocks will tend to lead to inaction. This paper runs through 40 years’ pension history in order to distil four ‘stylised facts’ that can characterise the situation in Greece. It then proceeds to examine three general processes inherent in the economics of pensions rather than the speciﬁcities of Greece, which underlie these stylised facts. The third section takes a more applied look at processes that have characterised the attempts to break the log-jam in the last few years. Finally, the paper gazes ahead towards the prospects for reform in the medium term.