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Structures, political competition and societal veto players: the politics of pension reform in Southern Europe

Carrera, Leandro N., Angelaki, Marina and Carolo, Daniel Fernando da Soledade (2009) Structures, political competition and societal veto players: the politics of pension reform in Southern Europe. In: The future of the welfare state: paths of policy innovation between constaints and opportunities, 17-19 September 2009, Urbino, Italy.

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Abstract

Over the past twenty years, dramatic demographic changes and negative economic trends have put significant pressure on the financial sustainability of southern European public pension systems. While governments in the region have responded through a series of reforms that reduced the generosity of pension provision, promoted supplementary pension provisions and introduced minimum income schemes that were absent in these countries (Greece still being an exception) thereby following closely on the path observed in other European countries, a closer look shows different degree of reform success across the cases of Spain, Italy, Portugal and Greece. Thus, while Italy has been able to adopt more path-breaking reforms that ultimately reduced the generosity of the public pension system significantly while enhancing the role of the second pillar, reform in Spain has been more modest although the measures adopted have helped strengthen the financial sustainability of the first public pillar. Meanwhile, pension reform efforts have largely stalled in Portugal and Greece, and recent reforms have only been approved after providing significant concessions to the labor movement. What factors account for this variation in reform outcomes across these four cases? We argue that structures, the nature of political competition and organized labor’s preferences have shaped the outcome of pension reform. The extreme yet unequal generosity of the public pension system coupled with negative demographic trends led to significant deficits in the early 1990s in turn prompting governments to propose significant and urgent reforms in Italy and Greece while such factors played a less critical role in Spain and Portugal. However, the role of political competition and labor unions explains much of the success of different reform initiatives. In Italy, minority executives that were more independent from voter preferences successfully pushed for significant reforms while Spanish governments more threatened by the logics of political competition, have led more moderate reforms since 1995. In both cases, labor has supported reform after obtaining some key concessions. In contrast, governments in Portugal and Greece have usually been much more dependent on the political impact of pension reforms and they have faced stronger opposition by the labor movement. In this setting, the outcome has usually been very moderate reforms in scope whose effect has been diluted due to the concessions provided to organized labor.

Item Type: Conference or Workshop Item (Paper)
Official URL: http://www.espanet-italia.net/conference2009/
Additional Information: © 2009 the authors
Library of Congress subject classification: H Social Sciences > HJ Public Finance
J Political Science > JN Political institutions (Europe)
Sets: Research centres and groups > LSE Public Policy Group
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 21 Oct 2009 13:33
URL: http://eprints.lse.ac.uk/25539/

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