“CRISIS AND AUSTERITY:

A PAINFUL WATERSHED FOR THE

GREEK WELFARE STATE?”

MARIA PETMESIDOU

Democritus University of Thrace, Greece

Three parts of my presentation

1. Has rising social spending

contributed to the crisis? - The

predicaments of the Greek

welfare state

2. Major reforms (pensions &

health care)

3. Where is structural adjustment

heading?

(1) Is the “growth to the limits”

argument tenable?

Source: Eurostat

GDP per capita / Social expenditure per capita (in PPS)

as percent of the corresponding EU-15 average

0

10

20

30

40

50

60

70

80

90

100

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Risk of poverty and social

exclusion

Poverty rate

Per capita social expenditure (PPS) as per cent

of the EU-15 average

Per capita GDP (PPS) as per cent of

the EU-15 average

percentage points ς

Public debt and per capital social

expenditure, 2010

On the eve of the crisis the main

features of social protection in Greece

could be suitably described by two

parameters:

(A) The ‘hybrid’ form of welfare

arrangements across the major social

policy fields (social insurance, health,

social assistance and care), linked to a

distinctive pattern of redistribution

(B) The ‘density of historical’ time in

respect to institutional consolidation

(A) A HYBRID (AND FRAGMENTED)

SOCIAL PROTECTION SYSTEM

1.A Bismarckian but highly fragmented social

insurance system

Transfer-heavy arrangements - High degree of

polarization (generous protection of the “insiders” /

dearth of social protection schemes for the “outsiders”)

Blurred boundaries between social assistance and social

insurance

2. An incomplete path shift in respect to health

care

Extensive mediation of coverage by numerous health

insurance schemes markedly uneven across social

groups and geographic areas and chaotic in

organizational terms.

3. Rudimentary statutory social care (mostly

provided on a means-tested basis) – Informal

privatization of social care

(B) Institutional changes expanding

social rights and social programmes

took place in a much shorter time

period compared to northwest Europe.

Hence, consolidation of new

structures and institutions has been

weaker

(2) Structural reforms under

the “bail-out deal”

(A) PENSION REFORM (2010 onwards)

Amalgamation of social insurance funds (from about

130 to 13 with the 2008 legislation, but this remained on

paper / from 13 to 4 major funds with the 2010 reform)

A path-breaking overhaul – From a Bismarckian social

insurance system (based primarily on the first pillar), to a

unified, multi-tier system that distinguishes between a

basic (quasi-universal and not totally guaranteed) non-

contributory and a contributory pension, to be in force

from January 2015

Shrinking pensionable income & very drastic cuts in

replacements rates

Increase of pensionable age (from January 2013)

Blurry messages of policy in respect to early retirement

Successive rounds of drastic cuts in current

pensioners’ income (up to 40%- 50% of incomes for

certain categories of pensioners)

Late 2010 (special levy, threshold revised

downwards in August 2011, abolishment of

Christmas, Easter and holidays bonus, replacement

by a flat benefit depending on pension earnings)

November 2011, 30% cuts in auxiliary pensions

over 150 Euros, introduction of an upper ceiling for

total gross pension income

February 2012, further cuts in basic pensions over

1,300 Euros and in auxiliary pensions

November 2012, a further cut ranging from 5% to

20% of total gross monthly pension incomes over

1,000 Euros / abolishment of the above flat benefit

Notably

Adequacy

concerns are missing in

the “rescue plans” (as are

also any projections of the

effects of the reform

measures on poverty)

The positive trends in respect to poverty

reduction among the elderly, realized over the

previous decades, are reversed

Source: Eurostat

0

10

20

30

40

50

60

1995

1996

1997

1998

1999

2000

2001

2003

2004

2005

2006

2007

2008

2009

2010

2011

pove

rty ra

te

Greece, women 75+

Greece, men 75+

EU-27, men 75+

EU-27, women 75+

A highly unrealistic target set by the

“Memorandum” runs counter to adequacy

concerns

public pension expenditure should not

surpass an increase by 2.0 to 2.5

percentage points of GDP through 2060 (it

stood roughly at around 13% in 2009).

This target can hardly be achieved, as the

baby-boomers generation reaches

retirement, unless steep decreases of

pension income will take place (further to

the cuts already imposed)

Sustainability is questioned too

Most importantly, the social funds’

revenues are severely strained by:

steep decrease of wages,

galloping unemployment,

over 12bn losses due to the inclusion

of the social funds’ bond holdings in the

“haircut” implemented in 2012.

(B) Health care: The magnitude of fiscal

constraint and the policy tools deployed

Three strands of (on-going) reforms:

1. Health insurance and primary care (amalgamation of

health insurance funds through the creation of EOPYY –

The National Organization for Health Care Provision - a

hybrid organization that provides primary care, partly

funds the NHS, and is also partly a purchaser of services

from the private sector) – EOPYY pools contributions

from its constituent health insurance funds and receives

also state subsidy

2. Changes in the network of hospitals (in parallel with

changes in cost-accounting and procurement)

3. Changes in the public-private mix, cost control for

pharmaceuticals, use of e-prescription and e-referral

2

6,55,7

4,1

2,11,3

7,1

1,8

3,4

4,9

2,7

-7,9

-6,7

-0,9

0,8 1 0,5 0,51,2

-0,5

-10

-8

-6

-4

-2

0

2

4

6

8

10

Germ

any

Ireland

Greece

Spain

France

ItalyPoland

Portugal

Sweden

UK

an

nu

al avera

ge g

row

th r

ate

(5)

2000-09

2009-10

Annual average change rate in (total) health expenditure

per capita, 2009-2010 (constant prices)

Source: OECD data base

Total cuts in public health expenditure: about 5bn

Euros (2009-2012), and a further 1bn in 2013-2014.

Policy tools deployed

Financing (increase of user charges,

shift of the financial burden to the

patient……Outstanding debts to

suppliers causing severe disruptions of

service delivery…)

Affecting the cost of publicly provided

services

• Higher control over medical prescriptions (e-

prescribing and e-diagnosis systems), in

parallel with the development of clinical

protocols;

• New pricing rules for pharmaceuticals and new

procurement processes, matched by a greater

penetration of generics;

• Cuts in health personnel salaries and overtime

payments, freeze of appointments, increase of

workload

Affecting volume and quality of

publicly financed care

Cuts in the range of services provided

Rationing through increasing waiting times, or

other blockage mechanisms that may imply non-

transparent rationing processes.

System administration / regulation

Redeployment of health units through merging

and closures, reduction of acute care capacity

An initial assessment

•Economic goals (efficiency,

sustainability)

•Social goals (access and equity)

•Medical goals (improving health

outcomes)

•Responsiveness to users and medical

workers

Are efficiency gains used for improving

universal access, equity and quality of

services?

Measures do not embrace a long term

view for enhancing efficiency &

effectiveness (e.g. EOPYY, a second

NHS???)

Reductions in hospital capacity not

accompanied by any attempts to better

coordinate primary, secondary and tertiary

care

The effects on equity, quality and health

outcome are rather grim

Over 2 million uninsured; increase of unmet

medical need, infant mortality, mental

disorders & of the suicide rate; increase of

unhealthy practices, re-emergence of

infectious diseases, like malaria…..)

0

500

1000

1500

2000

2500

3000

3500

4000

1st quin

tile

2nd quin

tile

3rd q

uintil

e

4rth q

uintil

e

5th q

uintil

e

2008

2009

2010

Mean equivalized

private health expenditure

by income quintiles (2008-2010) - Greece

Source: Petmesidou et al. (project in progress on “Health and

Long-term Care in Greece”, funded by the Observatory of Economic

and Social Developments, INE-GSEE)

Infant mortality

0

1

2

3

4

5

6

7

8

EU-2

7

EU-1

5Ita

ly

Spa

in

Por

tuga

l

Gre

ece

Ger

man

y

Fran

ce UK

Swed

en

Polan

d

2002

2008

2011

Source: EU-SILC

Percentage points increase or decline of low

birthweight babies, 2008-2010

-1,5 -1 -0,5 0 0,5 1 1,5 2

UK

Sweden

Spain

Portugal

Poland

Greece

Italy

Germany

FranceDenmark

Czeck republic

Source: OECD Health data

Unmet medical need (“too expensive”), bottom and middle

quintile, 65 years and over

0

5

10

15

20

25

30

Czeck Republic

Germany

Greece

Spain

France

Italy

Poland

Portugal

SwedenEU-27

2005

2010

0

5

10

15

20

25

30

Czeck Republic

Germany

GreeceSpain

FranceIta

ly

Poland

Portugal

SwedenEU-27

2005

2010

Source: Eurostat

Source: Eurostat

0

10

20

30

40

50

60

70

80

90

100

2007, 1st quin

tile2007, 2n

d q

uin

tile2007, 3rd

quin

tile2011, 1st q

uin

tile2001, 2n

d q

uin

tile2001, 3rd

quin

tile

perc

en

tan

ge p

oin

ts

EU-27

Greece

At risk of poverty and social exclusion 2007-2011

•Fiscal sustainability overrides any

other goal, and health outcome

indicators already manifest a

deteriorating trend

•Concern for health inequalities is

absent from the policy context shaped

by austerity measures and by the more

specific bailout stipulations

•The human cost of austerity is still not

highly visible and a perilous future of a

“humanitarian crisis” is highly likely.

(C) Where is structural adjustment

heading?

•Is destructive austerity in the crisis-ridden

countries testing the limits to social

sustainability in Europe?

•Does this indicate a “game-changing” turn

in Europe prioritizing the dismantling of the

European Social Model?

•What can we infer from the way normative

tools (like the BEPG and the social OMCs)

are used by the EU Commission - particularly

in the context of the country specific

recommendations issued in the end of the

European Semester 2013?

The verdict may be still out .......

Available data show, however, that:

over a quarter of all EU population live in

conditions of poverty and social exclusion

(including close to one third of children)

a third of EU citizens find it difficult to afford

general health; 40% cannot afford long-term care

(Social Protection Committee Report, 2012)

and “de facto” privatization is expanding in

Europe (through increasing fees for health and

social care services, co-payments and private

insurance)

•The rolling back of social rights has

already occurred in Eastern Europe (as an

effect of structural adjustment)

•It is spreading in the southern periphery

under the current crisis (and the perilous

“re-enactment” of structural adjustment

in this region).

•Whether it “is a matter of time for this

move to affect core countries, strip the

European Social Model from its

universalism and turn individuals into

consumers in a totally new way”, is an

open question