The government is considering ad hoc solutions to tackle the major issue of retroactive claims by millions of pensioners and civil servants.
The response to the decisions expected to be made by the Council of State, which will inflict permanent fiscal costs, will be the introduction of “balancing measures” so as not to affect the budget. By contrast, in the case of any decisions that lead to a one-off burden on the budget, the government is planning to pay the retroactive payments in annual installments so as to reduce the impact on the budget.
Athens further intends to soften the fiscal blow by asking the country’s creditors for the exclusion of those retroactive payments from the calculations toward the primary budget surplus target to see whether the country is sticking to its pledges (for primary surpluses of 3.5 percent of gross domestic product every year). The payment would still be calculated in the official figures of the Hellenic Statistical Authority (ELSTAT). This was also the solution given in the case of expenditure for the recapitalization of the banks and for the migration crisis.
The main source of the retroactive claims with a permanent impact on the budget is the return of holiday bonuses to civil servants and pensioners: Given that each civil servant will have to receive 1,000 euros per year and every pensioner would stand to get 800 euros per annum, the yearly fiscal cost from the restoration of the bonuses is estimated at 3.3-3.4 billion euros, which is considered unaffordable for the Greek budget at this stage.
The government will then have to toe the line the European Commission drew in its latest report, and take balancing measures that would comply with the CoS verdict and contain the fiscal costs.
Among the measures under consideration are transforming the 12 monthly salaries of civil servants into 14, to include the Christmas, Easter and summer bonuses, thereby slashing the each month’s salary. Another possible measure is the reduction of the bonuses from the current level of 1,000 euros per annum, while tackling the pensioners’ bonus payment will require more creative accounting, possibly by way of a gradual reduction.