earnings - related public pension schemes past contributions or earnings are rescaled to adjust to changes in living standards between the time pension rights accrued and the time they are claimed. this valorisation of past earnings is mostly done in line with economy - wide wage growth or with labour productivity increase. france now rescales according to price growth only. such an approach would considerably decrease the implicit liabilities of the pension system in luxembourg. finland, portugal and poland rescale according to a mix of wage and price growth with evolving benefits. d ) indexation of pensions price indexation protects purchasing power ; wage indexation protects living standards. is a pensioner entitled to benefit from productivity gains in which he did not participate? the traditional life cycle consumption pattern assumes that old age people consume less or differently by increasing health care consumption. since health care is largely socialized or subsidized, productivity increases should benefit more wage income than pension income. this is all the more so as the labour force diminishes and the dependency ratio increases. in response one can argue that the increase in life expectancy also influences the consumption behaviour of old age. this is already reflected in private banking wealth management profiles. looking at the number of countries that have moved away from indexation of pensions to future wages the answer seems to be that political and financial sustainability do not seem to be mutually exclusive. but only piecemeal moves are observed in this area. some adjust to a mix of wage growth and price inflation and change the weighting. in italy, higher pensions are increased by less than price inflation. portugal also gives larger increases to smaller pensions. austria introduced a cap on price inflation adjustment. in belgium price indexation is linked to a trimmed down index excluding volatile elements such as oil products, alcohol or tobacco. in luxembourg, we do not only fully index wages but also pensions. we share this situation with slovenia. conclusion a year ago, at a conference on structural reforms at the central bank of luxembourg, governor garganas said that “ addressing the challenges for greece ’ s fiscal position and international competitiveness will require, first and foremost, sustained further progress towards fiscal consolidation, including measures to put the public pension system on a sound basis. ” these words have to be seen in the light of the epc report that shows for greece a below eu average evolving labour productivity rate and one of the strongest declines in labour supply. there is a clear trend towards a reduced pension promise, as shown as a consequence

. already now 1 / 3 of pension contributions, which are equal to 24 % of gross contributory incomes, are paid from the general budget. the buoyant growth rates - mainly from financial services - over the last decade helped finance the adjustment from an industrial society to a service - oriented economy. these growth rates masked above all high structural public expenditure, since the latter are matched by equivalent, but to a large extent cyclical or temporary, revenues. however this situation leaves a small and relatively undiversified open economy vulnerable to idiosyncratic shocks. the dominant financial sector might mature and yield lower growth with an end to the snowballing influx of cross - border workers. luxembourg would then hit the so - called “ pension wall ” in the absence of far - reaching reforms. the volatility of public revenue is already now twice that of larger, more diversified economies such as germany of france. the illusion of the balanced public budget has to be seen against the background of the depletion of budget reserves and even the occurrence of deficits during the last economic turn - down. the low debt level would only bring temporary relief, but acts as an encouragement to delay action. the currently favourable situation of the pension regime seems to encourage complacency rather than to be seen as a window of opportunity to set aside large assets. this is unfortunate, because the corresponding property incomes would offset the rising costs of generous pension benefits, at least if pension assets were equal to about 150 - 200 % of gdp. if the actuarial neutrality of pension promises, unsettled by longevity risk, cannot be mitigated by action on the asset side, like accumulating reserves and managing them more professionally or snow - balling influxes of young foreign workers to prevent rising contributions to threaten competitivity, then one must also start to look at corrections on the liability side. let me just add that expanding the contributive base with migration or commuters also has a cost in terms of expense in public goods in order to stay attractive and to provide additional transportation and housing facilities. iii. the scoreboard of benefits reform according to the eu commission 70 % of the pressure on public spending covered by demographic developments is projected to be offset by action on factors such as the employment rate, the eligibility rate and the relative benefit level of pensions. in the new member states of the union this percentage is supposed to reach 100 %. generally speaking public pension expenditure projections are most sensitive to