Greece is the cradle of democracy, and while using a referendum to choose its fate would seem to be in line with the democratic idea that the public should be master, it is instead a Greek tragedy directed by politicians.
The euro crisis began in 2010. The other PIIGS countries — Portugal, Italy, Ireland and Spain — have had to accept austerity measures and have seen their fiscal situations improve, while Greece is sinking and seems beyond help. This is why Greek complaints that its economy has faltered because of austerity are not persuasive. The crisis is a complication of Greece’s problems.
Since the beginning of the euro crisis, the concern that Greece might default has kept coming back, but most of the Greek debt has been shifted to eurozone institutions: The private sector now carries less than 20 percent of the debt. The firewall is in place and will prevent a Greek default from spreading. Above all, the Greek economy makes up just about 2 percent of the eurozone economy and its debt is 2.5 percent of eurozone debt.
If it defaults, the impact on international financial markets can be controlled. This is also why its international creditors — the IMF, European Central Bank and EU — knew what they wanted during bailout talks instead of offering concessions.
Greek politicians ran out of options, opting for a referendum to pass their responsibility to the public. Greece has become a scoundrel nation that will not pay its debts; its referendum was a tragedy.
Greece is far away and its debt crisis might seem irrelevant to Taiwan, but the main sources of the tragedy are Greece’s pension system, which has destroyed its fiscal policy, and populist, manipulative politicians issuing irresponsible welfare pledges. These are very similar to what is going on in Taiwan.
A comparison of debt and pension woes in Taiwan and Greece shows that the situation in Taiwan is not much better than Greece’s.
Debt constitutes 170 percent of Greek GDP. By late April, debt from every government level in Taiwan, including hidden debts such as civil servant pensions and labor and farmers’ insurance, stood at NT$25 trillion (US$802.26 billion), or NT$1.07 million per Taiwanese — 156 percent of Taiwan’s GDP.
Pension payments make up 25 percent of Greek spending. Pension payments in Taiwan are forecast to reach 23 percent of spending by 2025.
Furthermore, Greece’s high salary replacement rate of 100 percent has been cut to 56 percent, while in Taiwan, the salary replacement rate for civil servants ranges from 89 percent to 102 percent.
Greece’s retirement age of 57 is to be pushed back to 67, while the average retirement age of Taiwanese civil servants is 55.
Taiwan is an aging society, a serious problem. People over the age of 65 make up 12 percent of the population and are forecast to reach 20 percent by 2025, echoing the situation in Greece. The proportion of employed young people is shrinking alongside salaries, making it difficult to shoulder the costs of retirement and welfare. A report from the Ministry of Civil Service shows that if pension payments are not changed, the military retirement fund could be bankrupt as early as 2018, the teachers’ fund by 2026 and the civil service fund by 2029. The labor insurance fund that pays the labor retirement pension is forecast to be bankrupt by 2027.
It is not impossible that the Greece of today will be the Taiwan of tomorrow. Furthermore, if Taiwan undergoes a fiscal crisis, international realpolitik means that the nation would not be able to get help from international organizations.
It would find itself in a worse situation than Greece. This is why the calls for pension reform are sounding anew.
Tragically, Taiwan’s government is behaving in the same vicious manner as the Greek politicians. Greek politicians are unwilling to make cuts in welfare, pension and other government spending or to increase taxes, and they are using a referendum to keep the public uninformed.
President Ma Ying-jeou (馬英九) keeps emphasizing the importance of pension system reform, but the reform talk is just a ruse. By the time he steps down, he will just breathe a hypocritical sigh of regret and lament that he never managed to push through the reforms.
Most Taiwanese are rational and passionate about reform. Opinion polls show that 82 percent of workers and 79 percent of civil servants support changes in the pension system, which makes it clear that those who oppose reform are in the minority.
The government and opposition parties must tap this national mood to complete pension reform as soon as possible to resolve the risk of fiscal bankruptcy and save Taiwan from sinking by resolving conflicts between generations and social classes.
Translated by Perry Svensson
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