IMF unwavering on pension cuts

IMF unwavering on pension cuts

The government’s aim to suspend pension cuts due to come into effect in January is likely to fuel friction in the coming weeks, Kathimerini understands, as the International Monetary Fund is adamant that the reductions should be made even if they are not required for Greece to meet budget targets.

The IMF’s stance is at odds with that of European officials who are more flexible on the issue, as European Economic and Monetary Affairs Commissioner Pierre Moscovici has suggested in a series of recent comments. Indeed, according to sources, the EC’s envoy to Greece, Declan Costello, is working on a compromise that would be acceptable to the government.

The IMF has not publicly declared its position on the Greek pensions issue yet but sources say the Fund has not shifted from its stance in favor of pension cuts despite the more favorable than expected fiscal forecasts, due to fears about the Greek pension system, which remains unsustainable partially due to the country’s aging population.

The IMF’s unofficial position, it seems, is that fiscal savings worth 1 percent of gross domestic product – the value of the planned pension cuts – are not required for Greece to achieve a primary surplus of 3.5 percent of GDP but it is preferable that they be carried out and offset by countermeasures than not carried out.

IMF mission chief Peter Dolman is expected to defend that position on his scheduled return to Athens on September 12, along with the envoys of the EC and the European Central Bank.

In any case, final decisions on the matter are not expected before November when the final draft of the budget is to go to Parliament.

The issue is also expected to be discussed by eurozone finance ministers in October. An insight into Germany’s stance might be gleaned fromThursday’s scheduled speech at the Hellenic Bank Association by Germany’s Bundesbank President Jens Weidmann.

The pensions issue is a crucial one for Tsipras’s government who, according to sources, is determined to avoid the cuts even if it means suspending plans for so-called countermeasures including tax cuts and benefits to come from next year’s primary surplus, which could amount to 900 million euros, according to current estimates.

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