Editorial: Pensions and the spectre of bankruptcy

In the first half of 1985, the Greek economy was teetering under the weight of the dual deficit of the budget and the foreign trade balance. The pressure was such that foreign currency reserves had receded to just 300mn dollars.

Despite that, Andreas Papandreou ran for re-election on 2 June with the pledge of “better days”.

He won the election, of course, but the day after he was seeking measures to check the coming crisis.

In October of the same year, he agreed with the then European Economic Community (EEC) to implement a three-year stabilisation programme, in return for a loan of two billion ECU (European Currency Units).

That programme provided for a 15 percent devaluation of the drachma, down payments for approval of the import of goods and raw materials, a three-year wage and pension freeze, new taxes, checks on labour strikes, and a host of other measures.

The stabilisation programme, based on the slogan “we consume more than we produce”, produced results. It was implemented, and combined with certain structural changes, it created the conditions for a change in the country’s economy.

However, the then government could not withstand the weight of the political cost, and at the end of 1987, entering an electoral cycle, prematurely suspended implementation of the stabilisation programme.

The result was that two years later, in 1989, the Greek economy was again confronted with an economic crisis, which worsened due to the inability to elect a one-party government.

It took nearly nine months of coalition governments and three general elections to again restore a relative balance in politics and the economy.

Many believe that it was then that the foundations of the 2009 bankruptcy were laid, or rather that since then the Greek political system struggled constantly with the threat of bankruptcy, which in the end came, exactly because of the vicious political mores that prevailed in Greek politics since then.

Now, thirty years later and after the many bitter experiences of the eight-year crisis, one sees the conditions emerging for a repetition of the same mistakes.

The pension cuts as of 1 January 2019 that were passed into law in the framework of the fourth bailout evaluation, to ensure fiscal stability in light of the exit from the memorandums, are dominating the current political debate and will likely be an apple of discord in the next general elections.

The government, which accepted the harsh measure – under the pressure of Poul Thomsen and the IMF, as ministers say – is now considering the political cost, and is cultivating expectations of a suspension of the measure.

No one is a masochist, and no one can be happy with cuts in pensions that have already been slashed.

However, everyone has a duty to consider that this measure was imposed in order to ensure the pension system, and to retain over time the necessary conditions of fiscal discipline.

If the funds are not secured, and the viability of the social insurance system is affected, it is impermissible for anyone to cultivate false hopes, for clearly electoral reasons.

The government has a duty to think twice and thrice before making any decisions.