Updated bailout agreement sees possible adjustments to retirement age, payouts

The Greek government may soon have to increase the country’s retirement age and slash pensions further, according to an updated copy of its bailout terms seen by Sunday’s Kathimerini.

The Memorandum of Economic and Financial Policies (MEFP) prepared by the International Monetary Fund commits Athens to producing by September this year an actuarial report on the Greek pension system. This will include auxiliary pension funds. This report will then form the basis for negotiations with the troika on retirement ages as well as the size of pensions and lump sum payments to retirees.

The timeline set out in the MEFP foresees Greece and the troika agreeing on a new formula by October this year and the new legislation governing pensions being voted through Parliament in November so it can begin to apply from January 1, 2015.

This would be the second major overhaul of Greece’s pension system in about four years. In May 2010, Parliament approved legislation that raised retirement ages, currently at 65, introduced disincentives for early retirement and curtailed pensions. Since then, though, pensions have been slashed several more times.

In March, the Labor Ministry’s Ilios system showed there to be 2.65 million pensioners in Greece, which spent a total of 6.8 billion euros on pensions in the first quarter of the year. The average monthly retirement pay, including supplementary pensions, came to 941.47 euros. The average basic pension is roughly 700 euros per month.

According to the MEFP, the government will also have to remove all the parafiscal charges that currently help pension funds raise revenues. This includes scrapping the “aggeliosimo,” which the IMF refers to as an advertising nuisance tax, that firms have to pay when they place an ad in the media.

The updated bailout agreement does not call for any new spending cuts in 2014 but sets public expenditure at the same level as 2013. This means, however, that the government will have to adjust its budget as it had foreseen spending 320 million euros more than the previous year.