Greek government ready to tweak pension plan following lenders’ objections

Greek government ready to tweak pension plan following lenders’ objections

The government is prepared to concede ground to its lenders over their objections to proposed pension reforms and, in a double-pronged strategy, also offer incentives to opposition parties through a change in the electoral law.

The first week of negotiations surrounding the bailout review made it clear that the creditors object to plans to raise social security contributions by 1.5 percentage points and to change the structure of income tax.

With regard to the hike in contributions, the coalition seems prepared to lower the rise to 1 percentage point and to make the remaining savings by slashing supplementary pensions and limiting some high-end basic pensions.

On tax reform, the lenders argue that a proposed 50 percent rate for earnings above 60,000 euros is too high and that the self-employed should not have the same tax brackets as salaried professionals. Sources suggested that the government is willing to make changes to its scheme to accommodate the institutions’ views.

“As a rule, at the beginning of every round of negotiations, there are differences,” Economy Minister Giorgos Stathakis told Kathimerini. “The government has put forward its position on each issue and I think that these proposals are a basis for discussion and create the conditions for finding mutually acceptable solutions.”

Stathakis would not be drawn, though, on when the government thinks the review could be concluded. “Our aim is to complete the first review as quickly as possible.”

Another obstacle in the negotiations is the sale of nonperforming loans by banks. Lenders were meant to be able to sell the NPLs of large business after February 15 but the government intends to extend the moratorium pending the review’s completion.

Stathakis said the government aims to create a body to coordinate and oversee these transactions. He also underlined the government’s determination to exclude at least some NPLs tied to primary residences from being sold to distressed debt funds.

Electoral law

Sources said that given the political challenges the government faces in completing the review, it will propose a change to the electoral law so that the 50-seat bonus for a winning party is reduced to 30 seats but also applies to coalitions or parties that have declared before the vote that they are prepared to govern together.

If passed by more than 200 votes in Parliament, the new law could apply from the next elections. It is seen as a move to encourage opposition parties such as PASOK and Potami to work with the government.

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