Platon Tinios (Piraeus University and LSE, European Institute)

March 2016

From Discussions without Change to Change without Discussions:

The technology of pension reform in Greece 2010-5

Paper to be presented at the Political Studies Association Conference, Brighton 23 March 2016

1. Introduction: Reform technology and its importance in pensions

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Pension policy is an issue which is bound to test governance capacity. By their nature pensions, and especially public pension systems, need to span a diversity of conflicting interests over generations and occupational groups. They do this in an environment characterized by cross cutting objectives from disparate directions from finance to poverty. They need to take into account direct and indirect effects on the wider economy, society and their prospects. In order to deliver any results, they need to engage by explaining complex issues to public opinion in matters touching individuals in direct and decisive ways. Pensions, being often the largest single item of public expenditure have the potential to derail public finances by affecting the size of public borrowing. Public pension promises have many things in common with other long term commitments, such as debt servicing, with which they interact in many ways. (Heller 2003) The importance of pensions as an input and complicating factor in overall social and economic policies and prospects was brought to the international limelight in the case of the Greek crisis. Government grants to finance pensions were instrumental in causing the debt crisis in the first place (Lyberaki and Tinios 2012, Giannitsis 2016). Pension reform was, thus, the first bill passed after the first bailout in July 2010. Despite that reform being hailed by the IMF as highly successful, pensions were back on centre stage five years later, as a priority reform. Major pensions changes were a precondition for the third bailout, while pension reform is back on the cards in early 2016. (Tinios 2016). The link of pensions to national debt management and debt sustainability can be appreciated by two observations. As negotiations with the EU stalled in June 2015 the Government was facing a severe liquidity squeeze: it only had enough cash to pay either July pensions or an IMF loan which was expiring at the same time. It chose pensions; sovereign default was only averted when the EU cleared the outstanding obligation to the Fund with a month’s delay. The dilemma the Government of Greece faced was between meeting a legal obligation to the country’s creditors or a moral obligation to its pensioners. It chose morality over legal obligations. It appeared that politically, the implicit obligation to pensions weighed more that the explicit obligation to holders of government bonds1. This last example illustrates the point that many eventualities pension experts have been warning would take place in the future, have already taken place in Greece. How matters were allowed and persist in allowing pensions to derail a country is thus of wider than local importance. The Greek case has repeatedly been shown to have the capacity to affect far wider collectivities. Conversely, the extreme situations the country has found itself can serve to illustrate eventualities which were posited theoretically or as portrayed as distant threats. What happened in Greece is thus important both in itself, and as an illustration of wider issues. This paper focuses on the special case of the failure of pension reform to forestall system collapse and to play a part in exiting the crisis. The next section examines the most recent proposals, and compares them to a reform blueprint first aired in 1958. The emblematic governance failure that provides the focus of explanation is the inability to implement and go beyond the 1958 blueprint. This failure is examined by shortcomings in what can be called ‘the technology of reform’. This is broken down in failures in three areas: First, in framing the discussion – which persists in missing the point of why reform is needed. Second, in the content of the discussions, which even after the bailout serve to postpone decisions. These postponements faced with objective problems in pension finance lead pensions to a downwards spiral of losing trust. The pension system and the country at large could be extricated from that, only by a fresh start. The final section looks at the process of discussions; it ponders the preconditions needed for a fresh set of proposals to be implemented.

1 Tinios 2015 offers a timeline of developments through to the third bailout.

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2. The least successful pension system in the world The Greek pension system never achieved sustainability; it increases current poverty and inequality, but gives little security at old age. (Borsch-Supan and Tinios 2001). Even so, it managed to bankrupt the country in 2009 (Lyberaki and Tinios 2012) and to undermine two adjustment programmes between 2010 and 2014 (Panageas and Tinios 2016). In 2015 it once again played a leading role – both in the lead-up to the referendum and the preconditions for the third bailout (Tinios 2015). In early 2016 disagreements about proposals for the third major reform bill are poised to derail the third bailout. The proposals tabled by Minister Katroungalos in January have led to widespread unrest. Those proposals essentially involve extensive consolidation, by applying uniform rules. These consolidations take place in three dimensions: Across generations, across occupational categories (i.e. between wage employees and the rest) and in administrative structures. (Tinios 2016). The 2016 proposals only repeat a key idea which was stated as government policy already in 1958. An authoritative Ministry of Coordination report then claimed that:

“There is urgent need of a system combining what is necessary with what is feasible and, free of the unacceptable position that its objective is to secure privileges of the few against the many, will use the available means to meet needs”. (Ministry of Coordination 1958, quoted in Tinios 2001)

That report, apart from clearly stating the goal of applying common rules across the population, also mentioned other specific items. All exist in the 2016 proposals or some of the reforms which immediately preceded it. Such are retirement ages, the existence of multiple insurance coverage, lack of reciprocity in pensions etc. The Greek pension system had been restarted in 1951 by refounding IKA. That organization had showed its first current deficit in 1957 and was already ripe for a reform centred around consolidation of existing structures and applications of general rules as social insurance coverage expanded across the country. (Tinios 2012b). The reform was ready to be implemented in detail in 19582. However, the impending 1958 elections (in which the left wing EDA did unexpectedly well) postponed its implementation. The same reform (or at least what looked very much like it) was also postponed successively in the following decades3:

• In 1968 the dictatorship was unable to pass the law which had been postponed by the collapse of the Papandreou government in 1965.

• In 1978 it was ignored due to preoccupation with inflation and nationalizations (what was then known as ‘socialmania’).

• In 1988 it was leaked to the press and then abandoned, despite being originally planned as part of the 1985/7 stabilization programme.

• In 1998 the reaction to the Spraos report (Spraos 1997) put paid to any ideas of action; the withdrawal of the Giannitsis proposals in 2001 was almost a foregone conclusion. (Featherstone and Papadimitriou 2002).

• In 2008 the ND government did pass a law with cosmetic changes, which did not avert bankruptcy a year later.

Interestingly for the symmetry of this series, the 2016 proposals entail the completion of their own effort in 2018. (Tinios 2016)

2 Tinios 2001 pp .. itemizes the recommendations in tabular form. 3 Kazakos 2009 provides an overview of economic policy to 2009.

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Thus, it is no exaggeration to say that the 1958 reform is still pending today. It might or might not be complete, sixty years after it was first made public. Procrastination of this magnitude must mean that something is systematically wrong with the ability to reform – with what we may call reform technology. What follows investigates this claim by examining three dimensions:

1. Framing the discussion: How to miss the point of reform: inability to see the issue has changed

2. The content of discussion: How to kick the can down the road; proposing the wrong solutions to the wrong problem.

3. The process of discussion: How to avoid a fresh start; failure is certain at the outset. Each question set covers a lot of ground very quickly; in order not to miss the wood for the trees, this is attained by means of three quick schematic presentations.

3. Framing the discussion: what should pension reform be about?

Advanced countries over the last half-century have been engaged in three generations or phases of pension discussion, each framing pension issues in a different dimension4. Schema A tries to summarise: The initial phase of pension discussion had to do with the establishment and spread of social protection across society (REF). Social protection systems had been devastated by the Second World War and had to be refounded urgently, partly to deal with urgent social problems faced by the war generations. Quick pension delivery, together with rapid increases of the working age population meant that the conditions were propitious for pay-as-you-go financing, in the sense that the Aaron-Samuelson (Samuelson 1958) conditions were almost everywhere in

4 Mackenzie 2010 provides an overview of the history of pensions.

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place5. Relative underdevelopment of the financial markets meant that the supply side also favoured large state-run systems. From the 1980s, pension systems entered what may be thought their mature or intermediate phase. In 1980 an OECD publication sounded alarm bells that social protection systems would need to cope with ageing populations (OECD 1980, 1988); there was widespread concern that existing PAYG-based pension promises could prove unsustainable. In the last two decades of the twentieth century the agenda of pension reform shifted towards sustainability with a focus on long term public finances. Policy prescriptions shifted overwhelmingly towards working longer and retrenchment of state pension systems. (Munnel and Sass 2008, Bonoli and Shinkawa 2006, Barr and Diamond 2010). In terms of institutional change, this period saw the parallel development of non-state pension provision and experimentation with institutional means of combining different modes of pension finance and provision to produce pension entitlements dependent on more than one source (Mitchell and Zeldes 1996). Figure 1.1. Spread of the introduction of private pension schemes in the EU, 2010

Source European Commission (2010) Private pension schemes: Their role in adequate and sustainable pensions, From the turn of century one can discern a different problematique entering pension discussions. This is prompted by two looming challenges arising from the side of the ‘real economy’: Globalisation and the possibility of shifting production over borders placed an emphasis on competitiveness. Added impetus was given by developments of technology and the nature of work, which potentially could challenge modes of production dominant since the Industrial Revolution. These concerns highlighted the need for system flexibility, the avoidance of open ended long term commitments as well as the need to respond to new types

5 Setting up new PAYG systems allow ‘grandfathering’ of the first generation, which can draw pensions without having first paid in contributions.

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of social risks. The need to safeguard the revenue base of social protection rekindled interest in multi-pillar systems as a kind of private/public partnership; approaches such as social risk managements (Holzman and Jorgensen 2001) stressed the complementarity of different kinds of provision and finance. Pension reform in the OECD took off from the 1990s (ECE 2015). Pension systems from the US to S.Korea increased minimum retirement ages of public systems. Many countries have introduced explicit multi-pillar systems, while the spread of Notional Defined Contribution systems (Holzmann and Palmer 2006, Barr 2012) is altering the risk profiles of public systems. The vast majority of EU countries have introduced and develop private pension system in parallel with public systems; Figure 1 shows that in 2010 only France, Spain and Greece persisted in not assigning an explicit role to private systems in their overall pension architecture. We can see that OECD and EU countries have a well developed, coordinated and explicit strategy to cope with the ageing challenge (Ageing Working Group 2015). They have also begun to deal with some of the 21st century issues: we can understand the shift to defined contribution (termed in the US as the ‘privatisation of risk’, Orenstein 2012), partial prefunding and other qualitative changes in pensions as attempts to alter the risk profiles of the pension systems to accommodate the new social and economic challenges. (Pension Adequacy report 2015). The Greek pension system, from the start, was overwhelmed by the issue of fragmentation, both in terms of institutions and in terms of insurance arrangements (Tinios 2012b)6. This channeled discussion towards distribution between occupational groups and within generations. It thus often missed the larger inter-generational issues. Even when long term sustainability issues were raised, this was often to illustrate points about occupational distributions. The existence of a wide distribution of ages of retirement representing privileges operate to cloud and confuse the larger issues of generational balance. Even the intervention of the troika in pensions in 2010 was spurred on by citing the Greek hairdressers as ‘a heavy industry’ (justifying early retirement)7 rather than by any overall expenditure projections, which were conspicuously absent8.(Tinios 2014, 2015) Overcoming fragmentation of the Greek system was the heart of the original 1950s ‘question set’. The fact that this issue had actually worsened in the intervening period, acted as a kind of smokescreen hiding other issues that appeared subsequently (Tinios 2010, 2012). Greece had got stuck on the original question - how to ensure the pension system covers the population equitably. Fixated on that, Greek society missed the fact that, in the meantime, the world had moved on. The out of date framing of the question affected the type of reform that was finally passed after the crisis erupted in 20109. This can be seen in two of its key characteristics: Firstly, it addressed sustainability only for the very long term and not for the period to 2025. It did this by instituting a new pension system that would have an impact only after the mid-2020s. This introduced a kind of dualism: While the situation affecting people under 40

6 The reason for procrastination to 2010, is not a weak and unstable political system – quite the oppostite (Triantafyllou 2006). Tinios and Poupakis 2013 find mechanisms of path dependence embedded in thee process of opinion formation, reinforcing other effects of fragmentation. 7 That example was seized by German tabloid newspapers to argue for the need of an upfront pension reform in the first bailout of 2010. 8 A further feature was pointedly ignoring the pension discussions which were then in operation. Stergiou and Sakellaropoulos 2011. 9 For more optimistic readings of that reform, see Simeonidis 2015, Matsaganis, 2011.

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changed drastically, those retiring up to 2020 persisted in facing old pension parameters, in some cases looser than before. Secondly, even the ‘new system’ introduced by the 2010 law is still no more than a large State-run-PAYG system of the type current in the 1960s. Total replacement rates for a full career are well over 90 per cent, while the whole of pension provision even to the wealthy remained exclusively the preserve of the State (Tinios 2010, Panageas and Tinios 2016). While occupational pensions were not banned, no ‘room’ was provided for their development. Far from the public and private systems complementing each other, the private system could grow only by directly challenging the credibility and veracity of the public pension promise. Recapitulating, the Greek pension system was trapped in a pension frame corresponding to an earlier generation. Many of the issues that transpired during the crisis could not begin to be discussed or understood, for as long as attention was directed elsewhere. The next section sees whether the way pension issues were perceived and discussed during the crisis could reorient discussion and possibly correct the problems. 4. The content of discussion: wrong solutions to the wrong problem Greek society after the 2010 reform faced the crisis with a dual pension system (Tinios 2016): On the one hand, a reformed, less generous system applied for younger participants. On the other, pensioners and those hoping to retire in the current decade faced essentially the old system. As the real economy went into freefall, this state of affairs translated into an incentive for early retirement. Thus, expenditure rose just as revenue fell. Inability to finance the shortfall by borrowing meant that finances had to be found from within the system. This, in a post-crisis world, could only be done by cutting pensions-in-payment. These, both primary and auxiliary, were cut on more than 10 occasions between 2010 and 2014. These cuts were accompanied by a series of other pension-related changes affecting (among others) early retirement, auxiliary pensions, disability pensions etc. The flurry of legislation, which was pinned on the troika, has been thought by some as a regime change signalling a sharp break with past practice. Indeed, what, before the crisis was talk without action, seemed to have been replaced by action without talk. Is this change sufficient to correct the problems spotted in the previous section?

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Pension discussions after 2010 had to square the overwhelming contradiction of repeated pronouncements that sustainability had been secured with the reality of repeated pension cuts (Panageas and Tinios 2016). In the period from 2010, pension discussions were characterized by four features, which in combination had the effect of postponing any real discussion to later. As before, but in a slightly different way, tackling the issues was simply postponed: As before, the can was kicked down the (same) road10.

A. The distinguishing characteristic was blame avoidance. The Greek authorities absolved themselves of responsibility for cuts. They did this by pinning all initiatives on the troika. Other negative developments were blamed on the crisis. The pension system and its operation was, by implication, blameless. Attention was shifted away from systemic problems, even from those long expected to be heightened in the current decade, such as the acceleration of population ageing (Spraos 1998). Thus ‘the crisis’ was blamed for everything, including for structural issues – a practice which ultimately favoured ignorance of changing underlying conditions. (Tinios 2015b).

B. Uncomfortable issues could be dodged by misinformation. The publication of data and statistical series was discontinued, even while the quality of data supplied to the troika was (reportedly) improving. The cessation of the Social Budget, an annual publication started in 1962, as well as other sources of information made temporal comparisons impossible. Newer sources were started and stopped apparently at will (e.g. the Helios system on monthly pension payments, started in 2013 and stopped in June 2015). Non-publication of data made the eventual assumption of responsibility more difficult; when data was made public incumbents would need to explain all deterioration since the previous publications, hence increasing ‘political cost’. This, among other effects made building political alliances harder, by preventing the sharing out of blame between political parties11.

10 This point is driven home by the IMF in a widely quoted intervention in February 2016: “Such difficult decisions cannot be “kicked down the road” through unrealistic assumptions.”, Thomsen 2016. 11 For example, ND while in Government never released the overview of the pension landscape which it was obliged to produce under the second MoU. In early 2016 it blamed all outstanding pension issues

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C. It was still easier not to discuss pensions at all- avoidance of discussion. Following the established practice of ‘ostrich interventionism’ (Tinios 2010), between bouts of reform, pensions would disappear from discussions altogether. Subsequent instalments would start from the beginning, as if previous instalments had not existed. This enabled governments to persist with the same strategy, even after external conditions had changed, through presuming that they were dealing with the same problem as before. (Tinios 2015b)

D. The previous three mechanisms encouraged the fourth, misrepresentation who function was to bend discussion to fit what was in the mind of the authorities rather than on real issues. Pension public perceptions wallowed in a web of Misperceptions, Misstatements and Misunderstandings (Tinios 2016). Examples are: The claim that pensions had been cut by 40%, when less than 4% of pensions had been cut by that and most pensions were cut by half of earnings (Misperception). Pensioner poverty has increased dramatically, when it had fallen by more than a third (Misstatement). Pensions of the ‘new system’ were low, when replacement rates for full careers were still the largest in the EU (Misunderstandings).12 Misperceptions had the effect of focusing attention on the wrong targets and fomented ignorance of the real issues. The end result was to exacerbate what was, in any case, the key problem of the Greek system path dependence – just another word for innate conservatism.13

The attempts to control the content of discussions postponed facing the real issues, in the same way that the fear of ‘political cost’ had done in the past. They locked the pension system in the same track as before – in what amounted to persisting with offering the wrong solutions to the wrong problems. Such a conservative course of action, passing the can down the road, was known before. One key difference, however, was not grasped by the authorities: Developments in the economic and social environment surrounding the pension system had accelerated and were, by 2015, dramatically different. In terms of an overall climate of instability and acute public finance challenges, they could be thought akin to some of the nightmare scenaria that pension experts had always warned would happen, if no action was taken. For example, repeated assurances of viability followed within weeks by their negation directly undermined the credibility of the pension promise. Participation in social insurance was no more than paying an onerous tax on labour, divorced from any expectation of personal gain later on. The difficulties in revenue collection, were not merely due to the crisis, but betrayed a deep suspicion on the part of the public: The pension system was no longer trusted to play its key role – to guarantee income security at old age. An pension system inappropriate to current challenged was coupled with blame avoidance to give rise to downward spiral, whose every twist led to a further delegitimation of the public pension as a whole. (Panageas and Tinios 2016, Tinios 2016b) The only way out of the vicious circle would appear to be a fresh start. Only a completely new reformulation of the pension promise stood any chance of convincing primarily younger participants that the pension system had anything to offer them. This is the key message of Spraos 1998. This message has slowly spread, e.g.Tinios 2010. The Bank of Greece was a late convert (Bank of Greece 2013). In late 2015 the Committee of Sages formed at the Labour

on the year-long tenure of SYRIZA since January 2015 – implicitly holding that everything, including the ageing challenge, had been dealt with by December 2014… 12 Tinios 2016 provides a more complete list, including the drop of GDP, the effect of the PSI, etc. See also Panageas and Tinios 2016. 13 O’Donnell and Tinios 2003 and Tinios and Poupakis 2013 look at how and why public opinion misperceives the pension issue.

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Ministry also argued forcibly for fresh start (Pensions Committee 2015), as the best way forward given developments since 2010. Advocating radical change, a complete fresh start, is not especially difficult to do. That passes to a more difficult question in political economy terms: How can such a radical change come about?

4. The process of reform: How to avoid a fresh start. We concluded that a radical change of pension regime – a complete change of the rules of the game - was needed in order to put a stop to the progressive loss of trust by the pension system. How would this take place and what is the probability that such a process can come to pass in Greece? A complete change of system is always a leap into the unknown for those affected. This is certainly so for providers, but even more so for the insured population. They would need to acquiesce in tearing up a familiar contract and replace it with something unknown and, indeed, unknowable. They would need to be convinced that they would be better off with the new situation, than with their current status. Economics and mainstream social science are not used with analysing such radical systemic change. Economics deals with marginal changes, making heavy use of the ‘other things being equal’ assumption; in systemic change the whole point is that other things are not equal. Sociology in the Weberian or Durkheimian is also more used to analysing the functions of institutions; gradual adaptation rather than abrupt change. The radical overhaul of a system and its replacement by something entirely different is the main focus of a different scheme of enquiry, unfamiliar to most mainstream economists – the Leninist Theory of Revolution. That theory contains a number of objective and subjective steps that need to be navigated through, both ‘objectively’ and in perceptions, before a complete change of system can be affected, including most notably an answer to both the ‘how’ and the ‘who’ of the regime change . Regime change builds up from Karl Marx’s notion of class consciousness: The fact that the working class has objective common interest (class in itself) needs to be supplemented by the widespread subjective realization of those interests (class for itself). Lukacs and V.I.Lenin further explore how that can muster political support in order that change can finally be effected14. Change needs to find a political advocacy, initially working within the system, in social democratic type parties. However, according to Lenin, only when a committed revolutionary party sets itself in the vanguard, will change become a reality. Applying such a schema to any systemic change is not difficult: A problem needs to be first realised and formulated, possibly in a technocratic form. This needs to be communicated widely so that there is an awareness of both why the existing situation is insufficient and in what sense the proposals are superior. Solutions within the system have to be tried and found wanting, before a new system with new rules is seen as a realistic possibility and is finally attempted. Pension discussions to produce a system operating with a different logic would need to go through equivalent processes: Studies or actuarial reviews point out problems; pension debate translated them so that people understand what the problems mean for their own particular circumstances. Tinkering within the parameters of the existing system needs to be tried and shown to be insufficient before a totally new system is finally implemented15.

14 The famous quotes from Karl Marx come from the 18th Brumaire of Louis Bonaparte. , Marx (…). Classic Marxist texts are G.Lukacs (1992) and V.I.Lenin (1992). 15 Tompson 2009 examine the process which specific pension reforms, both successful and unsuccessful have pursued in a number of European countries.

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Some of the pension reforms that have been undertaken were presented as radical departures, often breaking with established practice of consultation. For example, the Swedish reform in 1995 was decided between political parties and simply announced to the social partners, despite the Scandinavian tradition of consultations (Anderson 2006). Much is made in Sweden of the radical change in how younger contributors understand the system; communication of the content of notional accounts underlined a belied contributions was ‘their own money’. Latin American reforms stressed the element of rupture with the past. (Mesa Lago 1990). Eastern European reforms, such as those in Poland, stressed that the new system was entirely new. Other countries, such as Germany, chose to present similar changes stressing continuity rather than a radical break (Börsch-Supan 2006). In Italy the Dini reform underlined radical change for younger participants, but were more consciliatory towards older members, who have been extensively grandfathered (Ferrera and Jessoula 2006). Tompson 2006 gives examples, both successful and unsuccessful, of both approaches.

However it may have been elsewhere, advocacy of an entirely new system in Greece is a minefield in each of the four stages outlined in schema 3.

• Technocratic statements on pension prospects are heavily discouraged. Public institutions veer away from the issue, while no independent research body on ageing exists16. Research on the prospects of pensions receives little encouragement at universities and findings are seldom discussed. Speaking one’s mind is hardly encouraged and certainly not rewarded17. Reform proposals are seldom discussed18. Indiscriminate labelling, e.g. as ‘neoliberal’, also serves to impugn proposals and ensure they are not heard19.

• When opinions which go counter the general complacency are presented in the media, their proponents are subject to heavy bullying in the media. The messenger is blamed for the message, frequently subjected to personal attacks and invective. John

16 Tinios 2015 contains in an appendix a blueprint for a body to study ageing economics. INE-GSEE is a branch of the Unions Confederation producing ‘committed’ research. 17 Pension projections compiled by the Actuarial Authority only become available once they are published by the EU in Brussels. 18 Xafa and Tinios 2014 flesh out a radical concrete proposal originally made by Drassi, which had been ignored as though it had never been made. 19 One such is to label ‘neoliberal’ a pension reform that guarantees the continued exclusive role of the state fore pensions until 2060 – e.g. Busch et al 2013.

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Spraos most famously was attacked in banner headlines in 1997 of plagiarising a copy paste of the Chilean reform; his report had stated that ‘The Chilean system cannot be a model for Europe’, while he was ‘accused’ of proposing a multi-pillar report20. A printed retraction was only printed after three bitter communications by Spraos himself. Politicians who tried to speak their minds (e.g. Stefanos Manos) found themselves in the political wilderness.

• Parametric changes come in tiny instalments – too little too late. Reform by instalments misses the bigger picture and promotes path dependence. The authorities at best concentrate on promoting the next instalment rather than pondering whether the entire course is faulty. (Tinios 2005, 2010)

Radical systemic change has not taken place in Greece, because there is an absence of both reforms – in the sense of a fully worked out and fully explained package – and reformers – in the sense of determined politicians prepared to argue forcibly for reform. In consequence, despite a crying need for a refounding of the system, whenever pension reform opens, the country finds itself unable to prepare, plan, propose and implement real change. As a consequence, as both the preconditions and the groundwork are missing, failure is certain at the outset, even before reform starts. What Panageas and Tinios 2016 term the “Spraos question” – who will propose the needed reform – remains unanswered. 6. A breakdown in reform technology

Recapitulating, we have covered six steps: The Greek pension system was never able to correct its ‘original sin’; almost sixty years after the blueprint was first stated, it is still trying to overcome fragmentation and to apply general rules. Being unable to solve what lies at the inception of immature systems, it missed the fact that the world had changed. The characteristics of a pension system appropriate for the 21st century were very different – chiefly in how the system handles risk and the kind of commitments it makes for the future. Nevertheless, what was partly put to operation in 2010 was no more than a revamped 1960s statist pay-as-you-go system of the kind that other European countries had been abandoning in the last two decades. Such a system was tested by the Greek crisis, leading to widespread problems, which necessitated widespread reneging of the public insurance promise. Nevertheless, the mechanisms of procrastination continued to operate in a slightly different form, now built around blame avoidance. In this way, the need for a fresh start was repeatedly missed. The pension system sinks in a vicious circle of ever deeper mistrust. Even so, the system is unable to come up with the radical change needed to rejuvenate itself. Political economy conspires to ensure the absence of both reform proposals and of reform proponents. In such a way the system is unable to redeem itself – chiefly through a failure of reform technology. Can this breakdown be overcome? A French politician is said to have remarked “that he had never encountered a problem whose non-solution was not, in itself, a solution”. Greek pensions policy is still faithfully implementing this adage. The results of following this precept may have been satisfactory in political terms. However, they were definitely proved catastrophic in social and economic terms. The question remains: how to overcome path dependence and inertia to propose and implement reform? In the sidelines of discussions of the 2016 reform, some voices are beginning to put the case for ‘a new social contract’ – e.g. M.Nektarios 2016. The crisis is

20 Those familiar with the Chilean system know that it has but a single pillar. Spraos’ sin was to have used the word ‘pillar’.

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certainly making radical change easier, both by devaluing the old system in the eyes of participants, but also by making easier many of the technical problems. For example the repeated cuts make the technical problems of the transition period far easier to solve. Nevertheless, a period of preparation and maturation of the problems is needed before any meaningful change can be implemented. Will this time be different?

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