GREECE – The governor of the Greek central bank, Nicholas Garganas, has warned that Greece is set to pay 25% of its GDP in pensions by 2050, given the low retirement age, high unemployment and falling birth rates.

Garganas called for a labour market with opportunities for women and young workers to tackle the consequences of the country’s falling birth rates and increasing pension expenditure.

According to Bank of Greece estimates, pensions will cost an extra 10% of gross domestic product by 2050 – increasing the social security bill to a quarter of the country’s GDP. The governor pointed out that Greek people work on average until they are 59.5.

Presenting the bank’s annual report for 2004 Garganas stressed that the high unemployment rate, which a spokeswoman for the bank told IPE was estimated at around 10%, was a serious problem for the country.

Garganas also said that Greece’s growth rate for 2005 would be lower than expected.
Growth would be around three percent this year, contrasting with last year’s 4.2% and an earlier 3.9% forecast by the economy and finance ministry.

The issue of average inflation has also seen a discrepancy between the BoG’s estimate of four percent and the government’s expectations around three percent.

“Under these conditions, no economy could function since it will not be possible to face the increased expenditure just through public finance measures,” Garganas was quoted as saying by the Greek press.

The Greek economy and finance ministry was not available for comment.