In the heat of a June night, Eleni Spanopoulou found her audience at an Athens hotel turning ugly. Mutiny and violence hung in the air.
For hours the leader of the Greek journalists’ social security fund had been chairing a meeting about disastrous losses on retirement savings caused by the country’s economic collapse. “She tried to present herself as the fund’s saviour and asked (members) to double contributions to 6 per cent of salaries,” said one of those present that night at the Titania hotel. Ms. Spanopoulou, 58, did not succeed.
When she rose to leave around midnight, enraged fund members first swore, then waded in punching, kicking and tearing at her clothes, according to witnesses. A bodyguard managed to bustle her out of the room, but another group caught her just outside the hotel and gave her a second beating. She spent the night in hospital.
It was a brutal sign of the fury many Greeks feel at the way the country’s debt crisis has dashed hopes of a comfortable old age. Greece’s pension funds – patchily run in the first place, say unionists and some politicians – have been savaged by austerity and the terms of the international bailout keeping the country afloat.
Workers and pensioners suffered losses of about €10-billion ($13-billion U.S.) just in the debt restructuring of March 2012, when the value of some Greek bonds was cut in half. That sum is equal to 4.6 per cent of the country’s GDP in 2011.
Many savers blame the debacle on the Bank of Greece, the country’s central bank, which administers three-quarters of pension funds’ surplus cash. Pensioners and politicians accuse it of failing to foresee trouble looming, or even of investing pension fund money in government bonds that it knew to be at high risk of a “haircut” – having their value reduced.
A Reuters examination of previously unpublished data from the Bank of Greece reveals the bank invested pension fund money in €1.18-billion of Greek bonds after the economic crisis began.
Prokopis Pavlopoulos, a lawmaker in the ruling coalition’s conservative New Democracy party and former interior minister, said: “From July 2010 it was obvious that a debt restructuring would be inevitable. While foreign banks were unloading their Greek government bonds, no one moved to tell Greek pension funds to do something, that a haircut was coming.”
Ms. Spanopoulou, while deploring the violence she suffered, said: “The Bank of Greece knew about the haircut on bonds well in advance and should have informed (our) fund.”
The losses compound the woes of Greek pensioners, many of whom have seen their income fall; further cuts are expected as part of the latest austerity package voted through parliament in November.
The Bank of Greece rejects the criticism, arguing its room for manoeuvre was limited. Around the world pension funds routinely invest in government bonds, and the bank says the scale of Greece’s economic meltdown was not obvious when most of its pension fund investments were made.
“More than 90 per cent of the bonds that eventually suffered a haircut had been bought before 2009,” said Mihalis Mihalopoulos, a Bank of Greece official who invests money on behalf of Greek pension funds.
That is not enough to assuage critics, who say the pension fund crisis is one of the most neglected facets of the Greek catastrophe. “At the very least … pension funds were not warned,” lawmaker Mr. Pavlopoulos said. “The government … knew it was heading for a haircut and did nothing for these people, which I find hard to stomach.”
Having grown up piecemeal over decades, the Greek pension system is highly fragmented with about 200 official bodies running different funds, with different costs and benefits, covering numerous occupations.
Broadly, though, the majority of people rely on schemes with an element of government funding as well as contributions from employers and employees. The state also plays a pivotal role in deciding how such funds invest, and appoints the boards on many of them.