17/08/2011
By Matt Ritchie
New analysis of Greece’s austerity measures has revealed changes to pension arrangements are a mixed bag in terms of the distribution of the burden among the various income groups.
The EUROMOD working paper, The distributional impact of the crisis in Greece, models the impact of Greece’s austerity measures in terms of greater inequality and increased poverty.
Greece introduced a special levy on pension incomes, the pensioners’ solidarity contribution, in May last year. Pensions under €1,400 per month were exempted, though above that level, tax rates rise steeply from 3% to 10%.
In addition, while retirement pensions in Greece used to be payable in 14 monthly instalments the 13th and 14th pensions have now been abolished. These payments have been replaced by flat-rate vacation allowances totalling €800 a year payable to pensioners aged over 60 receiving a pension below €2,500 per month.
Pensions were also frozen at their 2009 level.
The research found the pensioners’ solidarity contribution had met its aim of placing a “much higher burden” on those earning high pensions than those on lower incomes.
“It can be clearly seen that this was achieved, since this measure hardly affected anyone in the bottom half of the income distribution.”
This was also true of the cuts in pension benefits, though to a lesser extent, with the redistributive effects of the cuts found to be “weakly regressive”.
Access the report here
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