In short, very. Greece’s economy had been floating on the two giants of tourism, and property values. Pre-2007, properties in Greece held some of the highest value per square foot in the European Union (EU). This lead to banks being more than happy to give generous mortgages to Greek citizens.
Taxes on these banks, as well as, property taxes lead to healthy streams of revenue for the Greek government, allowing the Greek government to have one of the most generous social welfare programs in the EU. A retired government social worker, for example, could retire after 35 years of service with 80% of their salary. This is much more generous than one of their main creditor nations, Germany, where you must work 40 years for 70% of your pay.
Social workers are not the only people whom receive healthy pensions. Olympic Airline staff, employees of the National Bank of Greece, and hairdressers, all receive government pensions. In fact, the Greek government has identified 580 job categories that merit pension and early retirement, 50 for women, 55 for men.
The lengthy list of pensions was already putting a slight strain on the Greek economy before the Great Recession, enough that lengthy debates and protests over the issue were already unfolding in 2004-2005. When the “property pricing bubble” burst in mid 2007, the Greek economy suffered far more so than most of its EU compatriots.
To put it in numbers, the debt the Greece had incurred, mainly due to its pension obligations, was about 113% of her Gross Domestic Product (GDP) in 2007. If nothing is done, by 2030 that debt will reach potentially 875% of her GDP. To state the obvious, this is an unsustainable amount of debt, the interest on that debt alone would cost nearly half of Greece’s tax revenue. With the Greek economy in freefall expectations are the tax revenue will only decrease by 2030, whilst the debt exponentially increases.
Now we are here in 2015, Greece’s situation has not gotten any better, it’s only gone worse. Pensions have hardly changed; in fact, in many cases benefits have been increased. Minimum wage is set to be increased, and tax revenue continues to decrease on a year-to-year basis. Greece is set to ask the EU for a third bailout, bringing their debt to the EU to about a trillion Euros.
What Greece will do with this debt, with these pensioners, and these obligations, is for her and her democratically elected government to decide. Hopefully, all goes well, for the Greek people’s sake.