Karl Marx had written, drawing on a note by the German philosopher Hegel, that history repeats itself—the first time as tragedy, the second time as farce.Mark Twain went even further, saying that history does not repeat itself—since people and times change—but it does follow the same basic patterns. This is because human nature—such as the thirst for power and the desire for reelection—remains unchanged.
Why did we mention Karl Marx and Mark Twain?
In April 2001, Labor Minister Tassos Giannitsis of the then-PASOK government under Kostas Simitis presented proposals for reforming the social security system. In May 2001, the government was forced to withdraw the bill amid intense opposition from labor unions, social groups, and PASOK officials.
Tempers calmed down once the “struggles” were vindicated, and life went on. However, this was entirely superficial. The outcome is well known. Public debt ballooned to dangerous levels, and in 2009–2010, the country was unable to service its debt as the markets stopped lending to it, resulting in a bailout agreement.
When asked about this, Mr. Giannitsis emphasized: “It has been estimated that the social security deficits between 2001 and 2009 accounted for around 70%–75% of the total increase in public debt during the same period. In other words, they were financed by foreign borrowing, which led to bankruptcy. Governments saw the problem—or should have seen it—but left it untouched, since otherwise they would have had to proceed with the reform that was canceled—or, more accurately, that they canceled—in 2001, or with some equivalent measure.”
Let’s fast-forward to the present day. The country will hold national elections within the next 12 months; polls indicate that securing a majority is a very difficult prospect, and we are witnessing the repetition of a familiar pattern—to quote Mark Twain. The government has succumbed to the temptation to announce or implement “populist” measures regarding pensions, satisfying certain social groups in the short term but undermining the stability of the system in the medium to long term.
Just as in 2001, so too today, “pro-people” measures such as the repeal of cuts to widows’ pensions, as proposed by Labor Minister Kerameos; the elimination of the personal adjustment in pensions; the expansion of the “Heavy and Unhealthy Occupations” category to include new groups—such as healthcare workers—and the apparent refusal to adjust the retirement age limits despite rising life expectancy are placing a significant burden on the pension system. The total cost
All this is happening even though Greece is one of the most aging countries in the EU, resulting in a ratio of workers to retirees approaching 1.3 to 1, when a ratio of at least 3 to 1 is required for the stability of the pay-as-you-go pension system. Of course, we do not expect to see any actuarial study that takes into account the impact of the above measures on the sustainability of the pension system to shed light on the matter. We will likely have to wait for the next EU report (Aging Report).
Some 25 years after the withdrawal of the Giannitsis reform—which could have prevented the collapse of the pension funds and mitigated the severity of the debt crisis in 2009–2010— the political system—and especially the government, which bears responsibility—does not appear to have learned its lesson.
The government, with the tacit consent of a silent opposition, is prioritizing the electoral horizon over the coming decades, paving the way for a new fiscal derailment with the aforementioned “pro-people” measures—no matter what it claims.