The Greek pension system has been costly, complex and distorted, contributing to the country’s fiscal woes and discouraging participation in the workforce. Several attempts to reform the system failed due to lack of implementation, vested interests, and court rulings that resulted in reversals of the approved reforms.

A series of reforms introduced between 2015 and 2017 basically unified the rules governing contributions and benefits among different groups of workers, thus reducing the existing fragmentation in the system. If fully implemented in the long term, these reforms can go a long way toward improving the sustainability of the pension system (pension expenditure would drop from just over 17.7% of GDP in 2015 to 11.5% of GDP by 2060). However, the reforms ran into problems and failed to create stronger incentives for building robust contribution histories, generate sustainable growth by improving the fiscal policy mix, and ensure equity and a fair distribution of the tax burden across generations.

Political priorities should aim to fully implement the 2015-17 reforms and complement them with additional reforms (such as further strengthening the link between contributions and benefits received and creating more incentives to work and contribute).

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