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Sunday, September 15, 2013

Did the euro kill governance in the periphery? | vox

Did the euro kill governance in the periphery? | vox

""Greece is the poster child for postponed adjustment. Greece's curse, more than any of the other peripheral countries, was an unreformed economy. Although the examples of arrested reforms are many, one of the clearest is the pension system, where reform has been considered imminent at least since 1990 as the system faced both a dramatically rising dependency ratio and an overly generous replacement ratio (OECD 2009). Furthermore, the system was extremely fragmented, with 236 separate funds in 2003 (O'Donnell and Tinios 2003) that caused inefficiencies and duplications and yet left many pensioners at risk of poverty. There had been sporadic attempts at reforming this defective system. Some changes had taken place in 1992 when the budget was under serious strain, but they did not tackle the long-term imbalances. The year 2001 saw the defeat of a reform package of the pension system that had first been proposed in 1958 and was already considered extremely urgent (Borsh-Supan and Tinios 2001). A new reform package, characterised by creative accounting and little real reform, sailed through parliament in 2002. The government of Greece had been under some pressure during the negotiations about joining the Eurozone. But once Greece had entered the Eurozone, the pressure was off, pension and other economic reforms were abandoned and not taken up again until Greece was already in the midst of the worst of the economic crisis.""

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