GREECE – Recent reforms to the pensions system is Greece are insufficient to avert a pension crisis that could see its state pension burden rise to 17.5% of GDP by 2025, the highest in the European Union, according to ratings agency Standard & Poor’s (S&P).

S&P points out that the longer term picture is even worse with Greece potentially facing a pensions bill equivalent to 24.8% of GDP by 2050, as opposed to the EU median that is predicted to rise to 13.6% over the same period.

Though Greece still trails Italy and Austria in terms of its state pensions bill, those two countries both adopted reform packages to deal with the impending crisis some years back.

“If Greece doesn’t take more action, and current fiscal trends continue, the current reform’s impact will be modest or might even exacerbate the financial pressure,” says a S&P spokesman.

According to S&P, the current package doesn’t tackle the issue of demographic change adequately and the introduction of a voluntary fully-funded private pension system won’t be enough.

“Developing this market under the current legal framework will be slow and pointless if the state system isn’t overhauled at the same time. The third pillar in Greece only represents about 3% of GDP, compared with the EU average of around 33%,” says the spokesman

S&P believes the Greek government needs to increase the age of retirement, index-link pensions to prices instead of public-sector wages and reform the labour market to tackle unemployment and boost the economy.