risks Article Public Pensions and Implicit Debt: An Investigation for EU Member States Using Ageing Working Group 2021 Projections Georgios Symeonidis * , Platon Tinios and Michail Chouzouris   Citation: Symeonidis, Georgios, Platon Tinios, and Michail Chouzouris. 2021. Public Pensions and Implicit Debt: An Investigation for EU Member States Using Ageing Working Group 2021 Projections. Risks 9: 190. https://doi.org/ 10.3390/risks9110190 Academic Editor: Cassandra Cole Received: 8 September 2021 Accepted: 21 October 2021 Published: 26 October 2021 Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affil- iations. Copyright: © 2021 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/). Department of Statistics and Insurance Science, School of Finance and Statistics, University of Piraeus, Karaoli ke Dimitriou 80, 18534 Piraeus, Greece; ptinios@unipi.gr (P.T.); mchouzouris@unipi.gr (M.C.) * Correspondence: george.simeonidis@gmail.com Abstract: Implicit pension debt is attracting increasing attention worldwide as a driver of fiscal dynamics, operating in parallel to the (explicit) National Debt. A prudent examination of a state’s fiscal prospects should ideally encompass both, with due attention paid to the special features of each kind of debt. The explosion of government deficits as a result of the COVID-19 pandemic only adds to the urgency of understanding the scale and nature of issues around accounting for contingent liabilities. The reports of the EU Ageing working group, produced and published every three years are used to derive estimates of the stock of outstanding implicit pension debt from flows of projected deficits. This can be performed for all European member states. This paper uses the last two rounds of the Ageing Report (2021, 2018) and derives conclusions on the evolution of pension debt and its correlation to the external debt. The paper concludes that producing comparable estimates of IPD should become an important input in EU policy discussion. Keywords: implicit pension debt; explicit debt; pension reform; ageing report JEL Classification: H. Public Economics—H5 National Government Expenditures and Related Policies—H55 Social Security and Public Pensions 1. Introduction: Pensions, Implicit Debt and Long-Term Fiscal Planning In June 2015, the Greek government only had enough cash to pay either the senior international bondholder, the International Monetary Fund (IMF), or the monthly pensions for July of the current year. This was a face-down between an explicit, legal, obligation and an implicit, moral one. The IMF payment had to wait; moral considerations prevailed, at least temporarily 1 . Greece was an early victim of a long-term fiscal dilemma to be faced by all ageing societies. Long-term contingent commitments must be factored in to the (already high) measured explicit bond debt. Long term planning has to encompass all current commit- ments pre-empting the distribution of future output. When delivery of promises falls due, countries could find themselves in a similar situation to Greece’s in 2015—weighing the relative urgency and costs of legal and political obligations. To plan for such an eventuality, the economic characteristics of both kinds of commitments need to be considered. The most significant type of economic characteristic and the starting point of any discussion is the relative and absolute size of total commitments. Greece might have avoided eventual bankruptcy if it had kept track of the accumu- lation of future commitments before it became too late. It could have been attained if the readily available projections of future flows of pension deficits could have been expressed in units that could be compared to the stock of outstanding national debt. This paper demonstrates that such an exercise is feasible using published information of pension projections covering the period to 2060. Moreover, estimates may be produced for all EU member states. We use this information together with plausible assumptions to produce estimates of implicit pension debt for all 27 member states of the EU. Risks 2021, 9, 190. https://doi.org/10.3390/risks9110190 https://www.mdpi.com/journal/risks