GREEK PENSION ADMINISTRATIVE REFORM 2012-2018

Università degli Studi di Padova A.Y: 2018/2019

Course: Public Management and Multi-Level Governance

Student: Ciucă Bogdan Răzvan Marian
Home university: Scoala Nationala de Studii Politice si Administrative, Bucharest
 Policy introduction

Background
Greece was strongly hit by the world financial crisis which emerged by the end of
2007, given the fact it was already a vulnerable state having a huge gap between income and
spendings. The Great Recession triggered massive structural weaknesses in the Greek
economic and monetary system. The turnoil of this situation was that Greece was forced to
ask for help from the other communitary states of the Euro zone. This was also triggered by
the fact that some crucial informations on the Greek crisis were released to mass-media, and
their crisis could no longer be controlled by themselves. Finally, the other states decided to
help Greece, and as an effect, a triumvirate was formed comprising the European Comission
(EC), The European Central Bank (ECB) and the International Monetary Fund (IMF). This
triumvirate, a specially designed mechanism set to provide Greece with financial help, was
named Troika, a slang term for the three organizations which held the most of the power over
Greece's financial future within the European Union.
The proceedings began back in 2010 when the Greek government and the newly
formed Troika agreed on a structured programme of financial help. The special terms of the
agreement were recorded in a Memorandum of Understanding (MoU). The Greek Social
Security System has lately showed signs uf instability and insolvency, so the main priority
of the MoU in order to restore Greece's economic balance was the Pension Reform.

The System Layout

Greek Pension System is based on three main pillars, with the second and the third
rather not so important because they are accounted either on the Occupational schemes for
the distribution of the pension or the Private Insurance, which applies to an insignifficant
amount of population. The first and main pillar operated as a defined Pay-as-you-go system
and provided three types of benefits, consisting in three ways of icome, as in main pension,
secondary or auxiliary pension and certain additional sums of money based on each citizen
contribution. The main pension consisted in 14 deposits a year. There is also a solidarity
grant provision regarding only Greek residents with no or low income.
Having said that, the Government was spending a quite big amount of money on
pensions and social care and this had to be changed by reforming the system according to
the provisions of the MoU.
In 2010 one of the first reforms occured and was one of the main of the first policy
cycle that Greece has been through under Troika. It came out with a new logic concerning
the first pillar of the pension system and divided it in two different parts: a basic one, which
is more like a safety net, paid 12 times a year and a proportional part which is not fixed and
it is calculated upon each pensionable person credits gained in his labour time. Two other
important provisions of the reform were legislation of the retirement age to 65, formerly 62,
and extension of the contributory period to 40 years, from 35.
After a few more reforms, the Greek government and Troika assessed the fiscal
impact of the reforms already implemented and also of the ones not implemented yet, and
decided that there was a need of a new interim plan. This plan, the Medium-Term Fiscal
Strategy (MTFS) brought new reforms and reductions, as well as an updated fiscal target
calendar up to 2015. By October 2012, it was extended to 2016, and then to 2018, and the
MoU was updated.
 Policy process

Since its designation in the 1930s, the Greek pension system has suffered numerous
changes in terms of structure and content it was reformed plenty of times, but the most
significant changes have been made under Troika. From all the reforms made so far, I chose
to focus on The Administrative Reform of 2012-2018, as part of the MTFS, because it
completes an entire policy cycle and it brings the most important changes into the system.

Agenda-setting
During the financial crisis they have been through, Greek government faced a lot of
problems, indeed, and politic context was constantly changing as new provisions from the
European Union came into being. The pressure on Greek public policies, especially on
financial and labor subsystems was very high from the EU competent bodies, as the entire
European community somehow depended on them and was, more or less, influenced by
them. Perhaps this is the reason the pension system, and not only, has suffered so many
reforms, because Greece had to deliver a response.
There were plenty of emerging problems in Greece, but not all of them constituted
concerning issues for the policy-makers. For a problem to be seen as a worth-solving one, it
had to be either based on a strong background and to have an important and developing
negative effect on a certain category of population, pensioners in our case, or to be pushed
up by some important policy actors having more often than not an active interest in the
respective outcome of the policy. Not later than 2008, there has been noticed a plethora of
Greek social security funds and since then policy makers struggled to reduce them for a
very simple reason: too much money was spent inefficiently. Even if they succeeded to
merge some of the funds, still most of them operated independently, even though they were
under a new name or scope. This represented also a problem in merging databases and
accounting systems and, on top of that, some internal clashes between high-ranking decision
makers and a few bureaucratic issues made it impossible, at least at that time, for the funds
to be merged. Bureaucrats have, in a way or another, facilitated the retry of solving this
problem by reintroducing it on the table of the Executive, not long time after some of them
have failed to implement it.
Also, as reports from the Organization for Economic Co-operation and Development
(OECD) have shown, Greece comes second on pension spending in Europe, as well as
Greek pensioners have to wait up to three years until they receive their first full pension
check, which did not go well on public opinion, having been organized public protests
against the Government, an easily predictable thing, given that in 2012 they suffered from
pension cuts, which were later ruled as unconstitutional. OECD is an organization
responsible for the previous policy cycle evaluation and, as we can see, an actor putting up
new issues on the institutional agenda Mass-media was an important actor during the
agenda-setting by putting pressure on high-officials with decision-making power and
representing people's voice, as it claimed to be, but it was rather accused of either being left
or right sided.
Greece's high spending on pensions may be somehow explained by the acceleration
of population ageing, but absorbing 17,5% og the GDP on pensions is definitely a proof of
an inefficient system which had to be reformed once again.
 Policy formulation
At the beginning of this phase, some external input was received as part of the
appraisal phase. For example, officials in Brussels stated: “The ball, ministers will conclude,
is very firmly in the Greek camp. I honestly believe this will be pretty short.”, meaning the
time lapse remained until Greece will figure out a way to finish crisis and pay the debts is
not that big. The input from Brussels helped a lot as it was rather a confidence boost which
facilitated the identification of further data and evidence required for coming up with a
relevant solution.
As for the dialogue phase, high-level Troika bureaucrats decided to meet their Greek
partners from the Athens' government in establish a new policy line under the provisions of
the updated Memorandum of Understanding, as Greece's debts to IMF increased. An article
from The Guardian confirmed: “Euclid Tsakalotos, the chief Greek negotiator in the talks,
ruled out any further cuts to pensions and increased the pressure on the IMF, the European
commission and the European Central Bank – the so-called troika of lenders – to soften their
approach to a country that has seen its economy shrink by a quarter in five years”. So, despite
of its problems, Greece was still going to receive support from European institutions.
Negotiations also led to a proposal of a new bailout, but the creditors demanded from
the very beginning a series of prior actions to be done by the government. First and most
important was the urgent action to steam early retirement. The result would be to take
retirement ages into serious considerations and to design new and effective rules upon the
process and conditions that one could retire. The text of the new Memorandum of
Understanding which accompanied the bailout accorded pension adjustement a very special
attention and high priority.
Greek minister of Labour at that time, Giannis Vroutsis, member of the New
Democracy party (central right) considered in early 2013 that futher checks on the estimated
contribution evasion are to be made, and depending on the results, the money earned from the
contribution evasion would be possibly used for avoiding further pension cuts which may be
demanded by Troika once again or, otherwise, to fill in the fiscal gap in the pension system.
Later that year, in September, the Executive came up with the devision of a plan to cut
back the evasion and also to merge and reduce the social security funds. They proposed a
system called Ergani, which had a huge database and could provide informations on
employers and employees who avoid paying contributions in order to be fined severely in
order to restore the deficit.

Decision-Making
The new minister of Labour and Social Solidarity, Georgios Katrougalos, came up
with the Government proposals, not dictated by external factors of decision, to try to find
equivalent measures in order to somehow substitute the MoU. As known, the number of
relevant policy actors decreases considerably in this stage, because when it comes to deciding
on adopting a particular option, only the ones with the authority to make public decisions can
involve actively in the process. The new proposals aimed to design new organizing principles
and to apply them to a set of issues which have let unfinished from the reforms begun in 2010.
Consolidation was the main idea of the new set of reforms the Greek Government has
decided on, and it was drown-out in three dimensions which I am going to present.
 The first one is consolidation among generations. This is set to start by 2016, and it is
basically a new calculating principle for the average income, a proportional pension system
on Defined Benefit (DB) lines. For the new retirees, the pensions will be simply calculated
under the new system, as existing pensioners will have their grants recalculated and if there is
any difference, this will be collected as a personal bonus. This proposal is also expected to
tackle the very unpleasant problems of reductions, and whether current pensioners will suffer
further cuts is yet postponed.
The second represents consolidation in revenue structures and it refers to consolidation
in the way contributions are collected. Precisely, entitlements are supposed to be calculated in
an equivalent manner for either employees, self employed, or free professions, applying
accrual rates to their lifetime income. Issues regarding the three types of employees have been
discussed before, but not well formalized. One of the regulations of the third MoU was
specifically the revenue consolidation and the abolishment of tied taxes.
The third and last is the consolidation within administrative structures and
consolidation between all protection tranches. The pension was divided into primary pension,
auxiliary pension and separation payments, with unclear demarcation between them because
all were mandatory, Pay-as-You-Go and Defined Benefit. What remains is the functional
consolidation, meaning the new pension tranches operate like unitary structures, rather than
loose confederations.
The key line of the whole decision-making process was no cross the line of pension
cuts. These proposals could be indeed understood as completing the course of adjustment-era
reforms.

Policy implementation
Immediately after the decisions were taken, the implementation of the reforms started
to take shape. One of the first measures was the introduction, in 2014, of a collection center,
included in the business and administrative plan designed in the previous phase. The system
used collects all the contribution for each employee and directly links them to the taxation
system, skipping some steps in the whole process and some useless bureaucratic checks, and
integrates all the collected data via the revenue services. Of course these implementations
were made by high-level bureaucrats and specialists in the economic field, but I think
whatever simplification of the system is welcomed anytime, given that nowadays time is our
most important resource.
Another important tool brought into action was the Atlas IT system, which was
basically a digital social security CV, which could be very easily accessed by every employee
via an online application. The system has been introduced in two phases, first in June 2014 for
a small part of the employees, rather as a testing tool and then, at the end of 2015 it was
available for each and every Greek employee.
In order to reduce time even more, and to make it easier for the Greek pensioner to
understand the whole process of pension system and also how and why he is receiving exactly
that amount of money - based on his contributions - and no more, has made a big step ahead
in the managerial direction by introducing a very large project funded by European
institutions, whose target is the codification and forming the codex of law. This is a good step
forward especially for the Minister of Labor and Social Security which was able to codify
more than five hundred laws, decrees and ministerial decisions.
Finally, a new administrative reform has been implemented based on a report
produced by the Centre of Planning and Economic Research (KEPE), an economically
oriented national think-tank, focused on encouraging the economic research in Greece and
having close ties with Greek Government. To be clear, the system introduced is to verify the
enterprises and separate the prosperous ones from the ones that fail to provide for their
employees and fail to pay their dues.

Policy evaluation
The administrative reforms made to the Greek pension system have had an almost
immediate effect on economic indicators, and have improved a lot of malfunctionning
structures, but still the effects of the crisis can be seen in the present, and will probably be
seen and felt in the near future.
At the end of MTFS, in 2018, Greek Government has demanded a set of assessments
on how the system works in partnership with Troika. Specifically on the administrative
changes that have been implemented, the assessment shows the results are good and most of
the targets were hit, as in the successfully retrenchment of the pension sector, along with the
construction of a more unified structure through the codifification and the adjustment of the
rules and laws using new digital, IT technologies. The fragmentation and has been tackled and
the social security funds hands have been substantially reduced redesigned so they could
merge together.
The retrenchment of the pension system has been a significant feature of the fiscal
consolidation effort done by the Government, successfully in a big proportion, but, still
observing the whole picture of the Greek economy, reforming the pension system has only
been a significant and mandatory change, but neither decisif nor enough tu fully redress the
Greek economy, as experts agree.
Post-crisis Greece came again into Europe's attention, as the further measures taken
by the newly-elected socialist government led to an increase of the deficit from 3.7 of the
GDP to 13.6, along with the increase of the national debt, Greece being once again on the
verge of the crisis, but with real hopes it could be avoided this time.

Mapping the actors

The whole policy process has been directly or indirectly influenced by several political
or non-political actors, institutional or non-institutional, and it depended in a big measure on
the collaboration and also the power relations between them.
Of course the most important actor by far was the Greek Government, which holds the
absolute power of decision over the greek society. It was involved in each and every stage of
the policy process, but the most important moment on the way, when they had a full
monopoly and authority over the policy, was the decision-making stage when they decided
exactly which proposals were going to be fructified and implemented.
Secondly, a very relevant group of players was consisted by a set of institutional
actors, such as the European Central Bank, the International Monetary Fund and the European
Comission, the ones forming Troika and setting up the Memorandum of Understanding. This
triumvirate played an active role especially in the Policy formulation and Policy evaluation
stages. Also on the category of institutional actors, playing a huge role in implementation
phase, are the bureaucrats. They basically strenghten the ties between the Government and
society, based on their expertise on different policy subsystems, collaborating with high-level
officials of the Ministers, as mentioned above. A significant role in the agenda-setting was
played by OECD, their evaluation report having somehow triggered the new roforming
process begun in 2012.
Also worth mentioning are the political parties which have governed during the years,
and designed their own agenda. Maybe the most significant party was the New Democrat
party, center-right oriented. An important Greek think-tank, KEPE, has decisively contributed
in the Policy implementation phase, having created a report on the base of which the
government creating a system of verifying enterprises. The last but not the least, mass-media
was quite important during the agenda-setting by reflecting the public protests in a way or
another.

Policy recommendations

Policy recommendations coming from different pressure or interest groups are more or
less relevant in this case, because it was a long-term reforming process coming in a moment
of severe crisis and the reforms were, in a big proportion, forced by the crisis, or anyway, the
crisis contributing much more than the usual imperfections of any usual pension system. So,
the recommendations come pretty much in the direction of re-reforming the system, because
of course, it has a lot imperfections, but I personally think they should wait until things are
fully settled with overall Greek economic problems and with the debts to Troika, and then
decide whether there is a need for a new reform or not.
 Bibliography

1.https://ec.europa.eu/social/main.jsp?langId=en&catId=89&newsId=2613&furtherNews=yes
2. http://documents.worldbank.org/curated/en/491431468178146012/pdf/105821-REVISED-
PUBLIC-1601.pdf
3.http://www.lse.ac.uk/europeanInstitute/research/hellenicObservatory/CMS%20pdf/HO
%20staff%20in%20Prees/BRIEFING-NOTE-PT.pdf
4. https://www.tripsavvy.com/troika-greek-financial-crisis-1525166
5. https://greece.greekreporter.com/2014/12/13/greece-spends-more-on-pensions-than-most-
countries/
6. https://www.theguardian.com/world/2015/jun/17/greece-says-bailout-deal-is-up-to-troika-amid-
speculation-over-exit-from-eu
7. https://www.socialeurope.eu/uncovering-profound-effects-pension-health-care-reforms-post-
crisis-greece