GREECE - The cost of public pensions in Greece is estimated to rise by more than 20% of gross domestic product by 2050, according to the latest report by the Organisation for Economic Co-operation and Development (OECD).
n the Economic Survey of Greece 2009: Enhancing fiscal viability, the OECD said there are a number of options for reform, including the use of notional accounts, similar to what is used in Italy and Sweden.
It said that the reform of the pension system requires extending contribution periods, increasing the entitlement to full early-retirement pensions from 37 years of contributions, and including all or most career earnings when calculating pension rights.
It also said the change to the list of physically arduous jobs, which allows early retirement, needs to be completed quickly and that minimum pensions should be limited to people who have reached statutory retirement age.
The country has already made some changes to deal with the costs of its pension benefits. Recent reforms include the merging of pension funds last year, which reduced the number of funds from 133 to 13.
The report said: "While recent reforms are welcome and a necessary step forward, they are not sufficient to stem the sharp rise in costs."
It said reductions in certain early retirement incentives will also help the retirement system, while standardizing operations and parameters of the recently merged funds to homogenize accounting rules and systems should continue.
However, the National Actuarial Society points out that these measures would only reduce the deficit of the main pension fund, IKA, by 10% after 20-25 years. If this was extended to all funds, it would limit the rise of pension expenditure to 10.5% of GDP by 2050, instead of 12%.
The report said that this was not enough to ensure the system's financial viability and that the recent reform did not change the generous pension calculation parameters.
The OECD also said high long-term pension liabilities have contributed to the increase in government bond spreads over those of Germany, highlighting the wider impact of the pensions system on the country's economy and the need for continued reform.
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