It was back in July 2021 when the (then) Deputy Minister of Foreign Affairs for Diaspora Greeks addressed the Greek-Australian community as part of a special online dialogue series to discuss the digitisation of Consulates, voting rights, the Greek language and a ‘Day of the Greek Diaspora.’
The meeting was attended digitally by over 100 people from across Australia, including prominent members of Greek community organisations, and distinguished guests. I was one of the attendees and I vividly recall a question being put to the Minister about the flaws of the Greek pension system and how reforms would benefit from considering the Australian experience.
The Deputy Minister promised to follow up on this matter, but this never happened and it is a characteristic example of the futility of these diaspora “dialogues”. The same July 21 issues were back on the “dialogue” table during the recent visit to Australia by Greece’s Deputy Minister of the Interior.
Almost three years later and this July 21 incident paved the way for a forthcoming book (in Greek first) under the direction of Professor George Bitros entitled “The Greek Pension System: the Problem and what do we do?”. Based on international evidence, pension systems face headwinds due to demographic and other shifts. Concern with demographics was also one of the reasons for the major rating agency Moody’s decision to maintain the country’s credit rating at “Ba1” outside the investment-grade range, with a stable outlook.
There is an interconnectedness in Greece’s case between demographics and its pension system, which renders it unsustainable. Greece falls well short of the “best” practice benchmarks, despite its noble intentions to overhaul the social security system by moving from a currently unfunded defined benefits scheme to a partially funded defined contribution model. A successfully adapting society learns from past mistakes, as well as the successes of others, and they apply these in a way that best fits their current situation.
In this context, the book cites works by some experts in which the pension systems of five nations are presented and evaluated. That is, Australia, Ireland, Denmark, the USA and China. The rationale being that it is necessary to examine the systems of countries that apply “best” pension practices, in order to draw conclusions useful for the pension problem in our country. This was preceded by a number of media articles on the Australian pension system during the rollout of the Greek pension reforms, which provided the motivation for the writing of this book. In essence, it is also an example of a diasporic contribution towards informing policy reforms in Greece.
Two key Australian contributions that form an integral part of this book are from Dr David Knox AM, Senior Partner, Mercer Mercer CFA Institute Global Pension Index and Greek-Australian John Livanas the CEO of State Super (a A$44bn Australian Pension Fund) and Director of the Australian Council of Superannuation Investors.
The Mercer CFA Institute Global Pension Index (the Index) uses three sub-indices – adequacy, sustainability and integrity – to measure each retirement income system against more than 50 indicators.
The provision of financial security in retirement is critical for both individuals and societies as most countries are now grappling with the social, economic and financial effects of aging populations. Within this context of uncertainties and long-term challenges, a comparison of the different pension systems around the world is valuable for policy makers, governments and the pension industry itself. Yet the structure and characteristics of pension systems around the world exhibit great diversity, with a wide range of features and norms. It is worth mentioning that the Global Pension Index does not include the Greek pension system in its analysis but the prospects of its inclusion may materialise in the future.
Unfortunately, the reforms carried out, repeating the bad Greek practices of the past and ignoring the advantages of the best international practices, will not compensate for the negative demographic developments. It will probably make them worse because, according to the recent migration literature, strong and sustainable third-country pension systems attract highly educated immigrants from countries like Greece that have problematic pension systems.
The life-cycle hypothesis (LCH) is an economic theory that describes the spending and saving habits of people over the course of a lifetime. The theory states that individuals seek to smooth consumption throughout their lifetime (including retirement) by borrowing when their income is low and saving when their income is high. The relation between LCH and social security has been the subject of pioneering contributions of Munnell (1974) and Feldstein (1976) through the “extended life-cycle model.” Pension wealth/savings should be counted as part of individuals’ resources and creative social security regimes impact on demographic and migration trends. Australia serves as a notable example as it has addressed the LCH with effective reforms over the years, and hosts a very large part of the Greek diaspora.
* Dr. Steve Bakalis is an expert in international business education and management, has worked with the Australian National University, the University of Adelaide, and in administrative positions in universities in Asia-Pacific and the Arab States of the Persian Gulf.
