CoS decision could disrupt fiscal balance

CoS decision could disrupt fiscal balance

The resurgence of court claims against austerity cuts, mainly the reduction of pensions in 2012, has increased the risk of a fiscal derailment and a rise in pension expenditure by up to 3.5-4 billion euros per year or 2 percent of gross domestic product.

The Finance Ministry is nervously awaiting an upcoming verdict by the Council of State, as Greece’s highest administrative constitutional court is soon to decide whether the provisions of legislation introduced in 2016 concerning the recalculation of pensions (known as the Katrougalos law) adhere to or violate the Greek Constitution. This is also linked to the government’s declared intention not to implement legislated pension cuts from January.

The government’s commitment under the third bailout program to comprehensively reform the Greek pension system, with the aim of saving about 1 percent of gross domestic product, is also associated with the clear pledge to “absorb the impact of the CoS decisions regarding the 2012 pension measures.” The law introduced by former minister Giorgos Katrougalos was meant to address both these commitments, with the recalculation considered a cure-all.

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