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A pension meltdown in Greece was reported in “Greeks rage against pension calamity” (Reuters, George
Georgeiopoulos and Lefteris Papadimas, 11/30/2012).
- “Under a law passed in 1997 and refined in 2007, pension funds have to place 77% of any surplus cash in a
pool of “common capital” managed by the Bank of Greece. The law required common capital to be invested
only in Greek government bonds or Treasury bills (T-bills). The remaining 23% of funds can be invested in
other assets, such as mutual funds, shares, and real estate.”
- “The aim of the measures, officials said, was to ensure that most of the money was safely tucked away for
a steady return. In the good times, this worked. But it was to have disastrous consequences when the credit
crunch that began in 2007 led to a crisis in sovereign debt.”
- “Foreign investors were not slow to see the danger. Many scrambled to sell their holdings of Greek debt, but
officials managing pension fund money at the Bank of Greece did not. … while foreign investors dumped
more than 100 billion euros of Greek government bonds from 2009 to 2011, the country’s pension funds
actually raised their holdings by 9 billion euros.”
- “Bank of Greece figures show that by June the pension fund assets it controlled had plummeted to 11.1
billion euros, made up of 8.7 billion in bonds and 2.4 billion in T-bills. In the space of three months, pension
funds had lost about 10 billion euros.”
And how did the Greeks respond to the 50% loss in the value of pension assets? A mob of pensioners
administered a beating to the leader of one of the funds at a meeting to discuss fund performance.