This article appeared in this morning's New York Times.
I gotta be honest - if you had benefits like this, wouldn't you like to keep them?
No wonder they're rioting in the streets!
All kidding aside, it will be interesting to see how this all plays out not only in Greece but across the globe. Right now the riots are targeting the government, but it really is more of an inter-generational issue. The pensioners want the pensions that were promised years ago, but the only way to pay for them is to tax younger workers (who are unlikely to be able to receive the same benefits when they retire).
And before we just dismiss all of the drama in Greece as just an isolated incident, it seems to me that the same issues will be confronting every industrialized country, including the U.S. After all, just look at the chart included in the article.
Payback Time
Patchwork Pension Plan Adds to Greek Debt Woes
A protester during a demonstration Thursday in Athens. As a consequence of bargains struck between strong unions and weak governments, Greece has promised early retirement to about 700,000 employees.
By LANDON THOMAS Jr.
Published: March 11, 2010
ATHENS — Vasia Veremi may be only 28, but as a hairdresser in Athens, she is keenly aware that, under a current law that treats her job as hazardous to her health, she has the right to retire with a full pension at age 50.
The New York Times
“I use a hundred different chemicals every day — dyes, ammonia, you name it,” she said. “You think there’s no risk in that?”
“People should be able to retire at a decent age,” Ms. Veremi added. “We are not made to live 150 years.”
Perhaps not, but it is still difficult to explain to outsiders why the Greek government has identified at least 580 job categories deemed to be hazardous enough to merit retiring early — at age 50 for women and 55 for men.
Greece’s patchwork system of early retirement has contributed to the out-of-control state spending that has led to Europe’s sovereign debt crisis. Its pension promises will grow sharply in coming years, and investors can see the country has not set aside enough to cover those costs, making it harder for Greece to borrow at a reasonable rate.
As a consequence of decades of bargains struck between strong unions and weak governments, Greece has promised early retirement to about 700,000 employees, or 14 percent of its work force, giving it an average retirement age of 61, one of the lowest in Europe.
The law includes dangerous jobs like coal mining and bomb disposal. But it also covers radio and television presenters, who are thought to be at risk from the bacteria on their microphones, and musicians playing wind instruments, who must contend with gastric reflux as they puff and blow.
And Greece may be an early indicator of troubles to come. Bigger countries like Germany, France, Spain and Italy have relied for decades on a munificent state financed by a range of stiff taxes to keep the political peace. Now, governments are being pressed to re-examine their commitments to generous pensions over extended retirements because the downturn has suddenly pushed at least part of these hidden costs to the surface.
The situation in the United States is different but also painful. The government will face its own fiscal reckoning, analysts say, as 78 million baby boomers begin drawing on Social Security and Medicare programs to support them in retirement. Without some combination of higher taxes, benefit reductions or an increase in the retirement age, both programs will run short of money to make their promised payments within the next few decades. And many American states are woefully behind on funding their pension obligations for public employees.
In Europe, the conflict has already erupted on the streets, with workers demanding that generous retirement policies be kept while governments press to pare pensions and raise retirement ages because taxpayers cannot bear any additional weight and creditors will no longer finance excessive borrowing.
The problem goes well beyond how to keep up payments and deal with budget deficits resulting from the financial crisis. Because of generous promises, unfunded pension liabilities in Europe far outweigh the stated debt that governments owe creditors, which have caught Greece and several other weak European nations in a borrowing vise.
According to research by Jagadeesh Gokhale, an economist at the Cato Institute in Washington, bringing Greece’s pension obligations onto its balance sheet would show that the government’s debt is in reality equal to 875 percent of its gross domestic product, which is the broadest measure of a nation’s economic output. That would be the highest debt level among the 16 nations that use the euro, and far above Greece’s official debt level of 113 percent.
http://www.nytimes.com/2010/03/12/business/global/12pension.html?hpw
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