Chances are increasing for avoiding further pension cuts

Chances are increasing for avoiding further pension cuts

Greek pensioners can rest a little bit easier regarding the additional cuts to their pensions that had been planned from January, after suggestion that the European Commission and the majority of European governments are in favor of putting this measure on hold.

Even the International Monetary Fund appears to have silently accepted Athens’s push to scrap pension cuts, although there appear to be some strong disagreements inside the Fund as a result of the possible impact that skipping the cost-saving measure will have on the long-term sustainability of the Greek social security system. In any case the IMF appears to be washing its hands of the decision, leaving it to the eurozone.

The final verdict is expected by the Eurogroup on December 3, with Commission sources hoping to see some consensus at the meeting of eurozone finance ministers, if only under certain conditions. Germany remains the biggest obstacle, as Berlin is taking into account the IMF’s reservations and guarantees that there will be no backtracking on Greece’s commitments, particularly when it comes to achieving the primary surplus target of 3.5 percent of gross domestic product .

Sources in the European capitals say the following scenarios are possible: a) Greece is asked to carry out a new actuarial study on the social security system within 2019 and implements the pension cuts if the need arises, or b) that the measure is not canceled altogether, but suspended temporarily and reviewed at a later stage in 2019 with a view to the implementation of the cuts.

Although scenarios for putting off a decision on the pension cuts had previously met with disapproval from New Democracy amid concerns that it would have to decide on the measure if successful in the next elections, the dominant view in Brussels and other European capitals is that keeping the issue open would be a possible compromise so as to appease those who are not convinced about the long-term sustainability of the pension system.

Another open issue concerns guarantees about the achievement of the primary surplus target, with sources saying that the Commission sees the 2019 draft budget’s measures falling short by 300-400 million from the target of 3.5 percent of GDP. European sources estimate that the government will be asked to sacrifice some more “counter-measures” – benefits, handouts and tax reductions – so that the figures that will be presented to the finance ministers can be more convincing.

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