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Greek Fiscal and Budget Policy and EMU 107Although they started out as funded plans, they have been operating on apay-as-you-go basis for many years. Taken together, the funds run a smallsurplus, but the surplus is nowhere near as large as the annual increase in thefunds’ liabilities. The system is complex, inequitable, and inefficiently administered– roughly 1 per cent of the nation’s workers are employed by thefunds. The system lacks adequate administrative data and is thought to besubject to considerable fraud. 3 Compared to the benefits provided by othersystems, Greek pensions tend to be quite generous – that is, they have highminimums and replacement rates and workers become eligible for benefitsafter contributing for relatively few years. A significant moral hazard existsbecause the government bails out bankrupt funds. In general, the relationshipbetween the total amount of contributions and pension received is veryloose; in some cases it borders on nonexistent.Government consumption. The growth of government consumptionaccounted for 12.4 per cent of the total expansion of the general governmentbetween 1976 and 2000. As a per cent of GDP, government consumptionspending rose modestly from 12.8 per cent to 15.1 per cent overthis period. The biggest component in government consumption is publicemployee compensation. In 1976 compensation amounted to 64.8 per centof government consumption; in 1990 this category accounted for 83.0 percent of total government consumption spending but it is projected torecede to 77.0 per cent in 2000. These trends are no accident. Both thenumbers of general government employees and real wages in the publicsector increased substantially, especially in the 1980s. Between 1976 and1997, the number of general government employees grew from 282.8 thousandto 487.0 thousand or at an average annual rate of 2.29 per cent, whileemployment in the balance of the economy grew at only a 0.55 per centrate. 4 Very large pay increases were granted in 1982. In that year, the averagesalary increases for the lowest paid civil servants reached, and in somecases exceeded, 100 per cent, while in the private sector the minimumwage increased by 46.4 per cent. The wage bill in the central governmentbudget increased by 33.4 per cent in 1982. Large increases were alsorecorded during the 1989-1991 period but increases subsided in 1992.Since 1995, pay increases have pushed up the ratio of public sector wages3. It is thought that a significant number of workers do not contribute the full amount theyare required to contribute and that many others receive excessive pensions or multiple ones towhich they are not entitled. While there are regulations limiting the maximum a retiree canreceive from multiple pensions, there are no mechanisms to enforce these restrictions. (OECD,Economic Surveys: Greece 1997, pp. 64-97.)4. Ministry of National Economy (1998, Table 3A).