Greece is on the verge of an economic collapse and its pension system is partially to blame.
Although the government has cut the country’s generous public pension benefits by as much as 48% over the last four years, it can do more.
Read: Worries about Greece hit world markets
Clamp down on early retirement – There was a time when hairdressers were allowed to retire early because the job was deemed “arduous and hazardous.” Not anymore. While the retirement age was raised to 67 in 2013, older workers are still allowed to get around this. The Greek government has proposed the crackdown begin in January. But if citizens are aware they can retire early, they’ll all retire in the next six months.
Cut down the number of public pension funds – Greece doesn’t have a few major plans to manage its public pension funds. In 2008, it had 133 separately managed public pension funds with 15,000 total employees. That works out to about 113 workers per fund, which is about twice as many as needed.
Read: Greek pensioners swarm banks
Crack down on tax evasion – A study from Johannes Kepler University estimates that Greece’s shadow economy was 24% of GDP in 2013. The size of the shadow economy in France and the United Kingdom are 9.9% and 9.7%, respectively. If citizens aren’t paying taxes, they’re not making contributions to public pensions.
Greece has to make reforms or risk taking its pension system, along with its economy, down with it.
Craig Sebastiano is associate editor of BenefitsCanada.com.