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Retired taxi driver Nikolaos Rikos, right, and retired trucker Fanis Kontoulis, are both 71 years old and supporting their daughters on meager state pensions, which are set to shrink further next year. EIRINI VOURLOUMIS FOR THE WALL STREET JOURNAL
ATHENS—Two years ago, Lumbi Nychas, 33, moved back into his childhood bedroom after sales at his jewelry store shrank drastically. A few months later his sister followed, along with her husband and daughter. Today they all depend largely on the state pension of the siblings’ retired 67-year-old father.
Mr. Nychas and his sister use his bedroom as their workshop and sell their handmade jewelry online. “What I miss most is my serenity, the opportunity to just be alone and relax,” said Mr. Nychas, who would like to earn enough to move back out but doesn’t believe that day—let alone the wherewithal to start his own family—will come soon.
Greece’s pension system, a benefit pumped up over decades by profligate politicians, has become a de facto welfare net for the country’s most vulnerable citizens, with millions of grandparents using what was meant to be retirement money to provide critical support for their extended families.
Nikos Avrilionis, 72, head of Greece’s federation of private-sector pensioners, is one of many Greek grandparents now taking care of their grandchildren while their children work to make ends meet. PHOTO: EIRINI VOURLOUMIS FOR THE WALL STREET JOURNAL
That broad dependency compounds the pain Greeks feel as the government prepares to enact a new round of pension cuts in 2018 and 2019. Retirees are expected to see their pensions reduced by up to a fifth in what will be the 13th cut implemented since the start of the bailout regime in 2010.
With such a large slice of Greek society relying on pension payments, retirement benefits have crowded out other forms of social spending that could be better deployed to address the scourges still plaguing Europe’s south: poverty, low birthrates, income inequality and a workforce unprepared for today’s economy.
Pensions in Greece currently account for 17.4% of gross domestic product, according to the latest data from the Greek labor ministry, the highest rate in Europe. Despite successive cuts, pension spending as a percentage of GDP reached its highest point during the crisis as the country’s economy shrunk by more than a quarter. But pensions grew so large in part because the state distributed what now appear to have been overly generous benefits for decades.
In the 1950s and 1960s, more than half of Greeks receiving pensions had paid no contributions. Until 2011, hairdressers, models and state-television newscasters were categorized as “heavy and hazardous occupations” for which one year of contributions yielded as much benefits as three years paid in by an accountant or retail salesperson.
That tradition of excess fuels a sentiment that older Greeks, perhaps through no fault of their own, have effectively hijacked the future of their children and grandchildren. Anxious to court voters, successive governments encouraged early retirement and repeatedly covered the yawning shortfalls in pension funds with deficit spending.
“I feel ashamed for my generation that it has created this intolerable situation for our children,” said Nick Nychas, Lumbi’s father.
While the situation is especially acute in Greece, pensions have stepped in where the welfare system falls short in much of southern Europe. Italy and Portugal also spend more than 15% of GDP on pensions, compared with less than 12% in Germany, the Netherlands and Sweden.
In Spain, nearly half of those 65 or older provide financial help to friends or families. In Italy and Greece, new retirees outnumber new entrants into the workplace, exacerbating efforts to set the system right. Greece now counts 2.7 million retirees against a working population of 3.5 million.
Lumbi Nychas, 33, lives with his parents and sister as he can’t afford his own apartment. He runs a jewelry business from his childhood bedroom. PHOTO: EIRINI VOURLOUMIS FOR THE WALL STREET JOURNAL
With the collapse of the Greek economy and unemployment at 21%, pensioners are providing the main source of income for half the people in the country. Some Greeks are even yanking their elders out of nursing homes so they can make use of pension payments that would otherwise flow to the caretakers.
In 2016, Greece paid out €30 billion ($35.7 billion) in pensions but less than €1 billion in unemployment benefits, which only one in three jobless Greeks receives. State-supported job training is also scarce.
The country spends less than 2% of GDP on support for families, housing and poverty relief, leaving much of such aid up to pensioners. And Greek grandparents are also the biggest provider of preschool care in Greece, a critical support to working mothers.
“We are basically raising children again,” said Nikos Avrilionis, a 72-year-old official of Greece’s retiree union. He and his wife care for their two grandchildren most days while their children are at work.
All this makes the pension cuts demanded by Greece’s international creditors especially painful, especially coming after so many previous reductions.
Over the last eight years, Vassilis Gogoulas, a 66-year-old retired bus driver, has seen his pension cut by 40% to €1,320 a month. Granted, that is more than most university-educated Greeks earn, and more than twice the state’s defined minimum monthly wage of €580. But Mr. Gogoulas says even before the cuts ahead, his reduced pension is barely enough to support his children and eight grandchildren.
Athina Kanoura, 72, cleaning vegetables in the coffee shop she helps her son run in the port neighborhood of Piraeus. PHOTO: EIRINI VOURLOUMIS FOR THE WALL STREET JOURNAL
“It was very difficult when we were young, but every year was a little better and that gave us hope,” he said. “Now this is a never-ending decline.”
The struggle to find money leaves southern European governments, including in Greece, with few tools to reverse the increase in income inequality brought on by the financial crisis. The dearth of antipoverty programs in the region is further exacerbated by the generational split: Poverty rates of young Portuguese, for instance, have doubled since the crisis, even as they have halved for those over 65.
Such gaps have fed demands for more income-support measures, though any such efforts would likely fall short. Greece launched a limited subsidy for poor families in 2016 but is struggling to fund it.
When Greece produced a surprise budget surplus that year, the government of Prime Minister Alexis Tsipras gave the money to pensioners. After an outcry from Greece’s official creditors and finance ministry officials, the government allocated the money to low-income Greeks in 2017.
“It’s too late for Greece to create a welfare state,” said George Koutroumanis, a former labor minister. “There are no resources left for that.”
Bus driver Vasilis Gogoulas, 66, who qualified for retirement at age 56, has seen his pension cut by 40% in the last eight years. PHOTO: EIRINI VOURLOUMIS FOR THE WALL STREET JOURNAL
Write to Nektaria Stamouli at nektaria.stamouli@wsj.com
