The government’s plans to implement the social measures the prime minister announced last month and not to reduce pensions look set to be reversed, according to the latest calculations by the country’s creditors.
A eurozone official told Kathimerini that the conclusion Brussels seems to have arrived at is that Greece’s anticipated fiscal surplus will not be big enough for the pension cuts to be avoided and the offsetting measures to be implemented.
That was also European Stability Mechanism chief Klaus Regling’s line on Tuesday: He told reporters in Luxembourg that “although there is fiscal space in Greece this year, it will not be large enough to avoid altogether the reduction of pensions agreed,” adding, “For that reason, we need to see precisely how much leeway there is.”
An ESM spokesman told Kathimerini that Regling meant there will not be enough fiscal space to have both the full preservation of pensions and the social measures announced by Alexis Tsipras at the Thessaloniki International Fair.
The second scenario of the draft budget that Athens presented to Brussels, which leaves out the pension cuts, has been calculated differently by the country’s creditors: They see that the primary surplus will only come to 3.2 percent of gross domestic product (or even less) next year, against a government estimate of 3.6 percent.
Therefore the government will find itself facing the dilemma of having to decide between inflicting targeted cuts on pensions (probably protecting the lower ones) and not implementing some of the measures Tsipras announced at TIF. Those measures include the abolition of the solidarity levy for lower incomes, a rent subsidy for families, lowering the Single Property Tax (ENFIA) and the reduction of the corporate tax.
“The decision over whether the pensions will be cut or not has not yet been made,” Regling stated, noting that “there are many ways one can cover any overperformance.” He used as an example the reduction of tax rates, highlighting that “taxes in Greece are very high.”