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Cyprus, Malta, Greece and Turkey have many factors in common. Not least is a need for pension reform, finds George Coats

The countries included in this review have a number of similarities. They are all washed by the Mediterranean, have histories - some more ancient than others - replete with victories, defeats and occupations, and in recent years have become tourist destinations of some note.

And they also all have immature financial services sectors and underdeveloped pensions systems.

For some, this is seen as a function of size. Malta's population is a little over 400,000, although this is slightly more than Iceland's 300,000 and is slightly less than Luxembourg's 470,000 and both of those have, or in Iceland's case had, considerable financial industries.

Cyprus, with almost twice Malta's population, built up its financial sector in the wake of the Turkish occupation of the north of the island in 1974 which included the best of its foreign currency-earning tourist sites. A tourism industry has since been recreated along the southern coast, and foreign earnings are augmented by a financial sector. But this has largely focused on attracting those looking for offshore accounts.

Malta and Cyprus were British colonies and inherited an Anglo-centric view of public finances when they became independent in the 1960s. But Greece and Turkey are long-standing members of the international community and during the Cold War were in the front line of the free, and free market, West. However, both have struggled with economic and financial policy.

For Greece, population 11m, a troubled relationship with public finances may be seen as a defining characteristic with a long tradition - there was, after all, considerable controversy over the funding of Pericles' ambitious building programme on the Acropolis. Like Turkey, by far the most populous of our quartet with 75m people, it failed for years to get its macroeconomy under control and had a rudimentary financial sector.

The European Commission's 2009 Ageing Report highlighted the vulnerability to the long-term affect of demographic changes of Greece, Cyprus and Malta, which would suffer the highest age-related budgetary impact of all EU members, and noted they have made only limited progress in reforming their pension systems.

Turkey, which unlike the other three is not a member of the EU or the euro, has a dependency ratio of around 9% of the population, reflecting an average age of just 27. Nevertheless it has a cumulative social security deficit estimated at 110% of its GDP and, although delayed, the mid-term demographic outlook is for an ageing society similar to that currently faces by most EU members.
 

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