Athens and creditors search for elusive deal to complete review

Athens and creditors search for elusive deal to complete review

Greece and its lenders are attempting to rescue an agreement that seemed within their grasp until a few days ago, only for efforts by Athens to renegotiate the terms of pension reductions to cause it to unravel.

A letter sent by Finance Minister Euclid Tsakalotos to the institutions last Monday proposing a different way to cut the equivalent of 1 percent of gross domestic product in pension spending from what had been agreed with the lenders just a few days earlier complicated matters.

Kathimerini understands that Tsakalotos sent the letter after Prime Minister Alexis Tsipras appeared unhappy about plans to cut pension spending in one go in 2019, the same year that the tax-free threshold for personal incomes is also being reduced. The Greek leader preferred to spread the pension measure over two years or for it to be put into effect in 2020. But the International Monetary Fund insisted that the fiscal measures should be implemented in 2019, before the next elections are due in Greece, because it is concerned that a new government might try to prevent their implementation.

By sending the letter proposing a different formula on pensions, the Greek government essentially undid the progress that had been made during talks in Brussels the previous week. The IMF’s immediate reaction to the missive was that if Athens wants to renegotiate the pension issue, the Fund would also reopen discussions on labour reforms, on which a tentative deal had been reached.

The IMF had agreed to drop demands for an increase in the monthly limit on collective dismissals and for employers to have the right to deny employment (lockout) during an industrial dispute. In return, Greece has accepted that collective bargaining of sectoral employment deals could only be reinstituted after the end of the current bailout program in the summer of 2018.

The disagreement means that it now seems impossible for there to be a technical agreement, or SLA, in time for this Friday’s Eurogroup in Malta. Instead, the gathering will be a chance for discussions between the key players aimed at deciding when the drawn-out review of the Greek program will be concluded. A European official who spoke to Kathimerini warned, though, that the longer the review remains open, the more demands the IMF can make.

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