Social Security Administration Confronting Sustainability Challenges the Greek Pension System from a Comparative Perspective

Date01 June 2014
AuthorAnna Tsetoura,Theodoros Galazoulas
Publication Date01 June 2014
140 Intersent ia
T G* and A T**
is paper explores su stainability in social security, placing a particular emphasis
on pension funds. e article starts by presenting various elements involved in a
pension scheme. Aer dening the problem regarding the scal challenges with
which pensions are confronted, both at international and at EU level, the research
concentrates on tracking down the mix of in struments underlying a pension scheme
which is best able to deal with the imbalances within it. Such imbalances have
become very intensive since the economic crisis of 20 08. A potential classication
of pension schemes is provided, and the ways in which the public and private
sectors may interact within the identied categories are outlined. e main focus
of our analysis is on the management and asset allocation of pension funds, and
comparisons are made be tween dierent practices in order to identify which a re most
suitable for ensuring sustainability. Finally, Greece is placed under the microscope,
and the parameters aecting the admini stration of its pension system are examined
from both an economic and a legal pers pective.
Keywords: administr ation; asset alloc ation; management; PAYG-funded; public-
private; social-nancial; sus tainability
* eodoros Gala zoulas has a n M.Sc. in Accou ntancy and C ontrol from the Universi ty of Amsterda m.
Address: Mavrom ihali 3, 68100 Alex androupolis, Gree ce e-mail: the odoros.galazou las@gmai
** Anna Tsetoura has a Ma ster of Laws in European Socia l Security from KU Leu ven and is a PhD
student at Aristo tle Universit y of essalon iki. Add ress: Synt hiki s Lozan is 4, 68100 Alexa ndroupoli s,
Greece; e-mail:
Social Sec urity Admini stration Confronti ng Sustainabil ity Challenges
European Jour nal of Social Secu rity, Volume 16 (2014), No. 2 141
Social secur ity, in particular pensions, is one of t he major remaining arenas for debate
for national politics in modern soc iety. In recent years, and due to generally higher li fe
expectancies, pension systems face the problem of longer periods of retirement. On
the other side, there are fewer employee contributions, due to the consta ntly declining
birth rate (Amman n and Singg 2008). e overall size of the population is projected
to be slightly larger in 5 0 years time, but much older than it is now (EU Ageing Report
2012). As long ago as 2001, the Stockholm European Council emphasised t he need
for the Council to ‘regularly review the long term susta inability of public nances,
including the expec ted strains c aused by the demographic changes ahead’. In 2009,
the ECOFIN Council gave a mandate to the Economic Policy Committee (EPC) to
update and furt her deepen its common exercise of age-related expenditure projections
by 2012, on the basis of a new population projection by Eurostat (EUROPOP2010).
At an international level, in relation to bot h adequacy and sustainabilit y, the need
is emerging to concentrate the eorts of public retirement provision on the most
vulnerable, as t he OECD’s ‘Pensions at a Glance’ (2011) analysis nds:
‘[T]hree of the countries w ith the lowest rates of i ncome poverty in old age – C anada,
the Netherlands a nd New Zeala nd – spend only 4–5% of their nat ional income on
public pensions, well below t he OECD average. In contrast , more than one in ve older
people in Greece and Spa in are poor whi le public pension expenditu re is relatively high.
e key to explain ing this patt ern is greater redi stribution wit hin public provisions of
retirement incomes. … Inde ed, many countries’ reforms have increas ed redistribution in
their retirement i ncome systems (Finla nd, France and Sweden, Australia and t he United
Kingdom). … In contrast, Aust ria, Germa ny and Japan have cut benets ac ross the
board, includin g for low earners. Fin ally, Hungary, Italy, Poland and the Slovak Republic
have tightened the li nk between contr ibutions and benets, el iminati ng all or most
redistr ibution.’
At EU level, the Green Paper published on 7th July 2010 by the ‘European Commission
Towards Adequate, Sustainable and Safe European Pension Systems’, demonstrates
the impact of the nancial crisis, wh ich has aected all EU Member States. On 2nd
February 2012, the White Paper was published, reect ing the results of the w ide-
ranging consultat ion launched by the Green Paper. As the White Paper 2012 indicates,
pensions represent a very large and rising sha re of public expenditure: more tha n
10per cent of GDP on average today, possibly rising to 12.5 per cent in 2060 in t he
EU as a whole. But with spending on public pensions ra nging from 6 per cent of GDP
in Ireland to 15 per cent in Italy today, countries are in rather dierent situations,
although they fac e similar demographic challenges:
‘In the last decad e, there has been consid erable progress in reform ing pension arra ngements.
… is has been implemented t hrough reforms th at aimed to make t he parameters of

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