Sovereign Debt Crises and Pension Reforms in Selected European Countries

By Hinrichs, Karl | The Poznan University of Economics Review, July 1, 2013 | Go to article overview

Sovereign Debt Crises and Pension Reforms in Selected European Countries


Hinrichs, Karl, The Poznan University of Economics Review


Abstract:

The "Great Recession" and sovereign debt crises in several EU countries in the wake of the 2008 financial market crisis have triggered drastic reforms in old-age security systems. Almost exclusively, the reforms meant retrenchments with often severe and immediate consequences for the living conditions of present and future pensioners. This paper deals with the contents and circumstances facilitating or enforcing the reforms in nine EU countries: Greece, Hungary, Ireland, Italy, Latvia, Portugal, Romania, Spain, and the UK. Cross-national comparison reveals similarities and differences and also sheds light on the social consequences that are already visible today.

Keywords: financial market crisis, pension reforms, Europe.

JEL codes: E32, J26, N34.

Introduction

The 1990s and early 2000s have shown that in democratic polities reforms of pension systems - parametric (path-dependent) as well as systemic (path-departing) changes - were not impracticable as was suggested by research on the "new politics of the welfare state" [Pierson 1994,2001]. Reforms came about when incumbent governments were able to shift or share the blame for enacted retrenchments, to hide the true impact of changes, or could even reap credit for reforms that put pension systems on a more sustainable footing in view of advancing population aging [Hinrichs 2011]. After 2008, however, in the wake of the "Great Recession" in a number of European countries plagued with high budget deficits and mounting sovereign debt, pension reforms came to the fore that were different in two respects. First, their magnitude was large, particularly when changes are taken together, and they (will) cause a substantial and immediate negative impact on the living condi - tions of present and future retirees. In a situation where austerity is no longer simply "permanent" but rather "pervasive", it is hardly surprising that pensions became a prime target for saving on expenditure because, almost everywhere, they are by far the largest item of welfare state spending which itself amounts to around half of total public outlays [Obinger 2012].

Second, the political process that brought about these changes deviated from previous attempts to retrench, re-finance or recalibrate old-age security systems. The post-2008 reforms in crisis-shaken EU countries were indeed large and sometimes also changed the hitherto pursued policy direction, swiftly passed the legislative process and were (or: will be) implemented with a short time lag. Hence, they can be considered as "rapid policy changes" [Rüb 2012]. Mainly, this reform pattern sprang from the pressure exerted by financial markets and supranational actors (IMF, European Commission) which urged governments to neglect voteseeking objectives within the well-known credit claiming/blame avoidance framework for the sake of attaining rapid savings on public expenditure [Bonoli 2012]. Consequently, in a number of countries reforming politicians were punished and lost power during subsequent elections because voters rarely appreciated retrenchments designated to overcome a "major crisis situation".

In this contribution eight countries will be analyzed - four Southern European countries (Greece, Italy, Portugal, and Spain), three CEE states (Hungary, Latvia, and Romania) and Ireland. All of them have conducted pension reforms after 2008 in order to ensure their schemes' financial viability in the short and long term or to realize notions of intergenerational equity. Most urgent, however, was regaining room for fiscal maneuver and obtaining financial aid from supranational organizations (IMF, EU). Seven of the eight countries had to seek such aid in the wake of the financial market crisis (2007/08) triggering an economic slump and, as one immediate outcome thereof, a sovereign debt crisis. The causal relevance of these events on the reform process can be read off from concrete recommendations issued by the European Commission or detailed reform demands attached to bailout agreements ("memoranda of understanding"), whereas the intensified reform effort of deeply indebted Italy was driven by the rising spread over German government bonds. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Sovereign Debt Crises and Pension Reforms in Selected European Countries
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.