Europe relents on pension cuts


Eurozone officials on Thursday essentially gave the green light for the suspension of planned pension cuts in January by not expressing any objections to the Greek government’s intention to scrap those reductions.

The final approval is expected to be given by finance ministers at a summit scheduled for December 3, when the budgets of other European Union member-states will also come under scrutiny. 

In comments at the Thessaloniki Summit on Thursday, Prime Minister Alexis Tsipras welcomed the development, referring to “very positive news from Brussels.” Tsipras claimed that next year’s budget is not only free of austerity but also includes growth-boosting measures. 

However, according to sources, the government’s bid to meet the ambitious target of a 3.5 percent primary surplus has been made at the expense of growth-boosting initiatives – namely 350 million euros from the Public Investment Program and 103 million worth of funds earmarked in the budget to subsidize the social security contributions of professionals under the age of 25. 

A key aim of both the Public Investment Program and the subsidies for professionals under 25 was to combat youth unemployment. 

The cuts to the already whittled-down program have stoked concerns that efforts to boost sluggish growth will be undermined. 

On the other hand, at the request of the European Commission, rent subsidies are to increase to 400 million from the 150 million that the government had included in the budget. Other measures include reductions in the ENFIA property tax and the social insurance contributions of self-employed professionals. 

The fiscal measures in their entirety will be revealed on November 21 when the Greek budget – and the budgets of all eurozone countries – are to be examined by the European Commission. In the evening of the same day, the budget will be submitted to the Greek Parliament. 

For its part, conservative New Democracy hit out at the government for its “unnecessary” budget surpluses, with shadow finance minister Christos Staikouras accusing it of “continuing to deprive the real economy of significant and absolutely necessary liquidity,” in addition to the overtaxation of households and businesses. 

Meanwhile, in a briefing to reporters, International Monetary Fund spokesman Gerry Rice repeated that the decision on whether or not to further cut pensions is one for Greece and its European partners, stressing that the Fund is no longer involved in funding a Greek program. 

“It is clearly an issue of the Greek government and the Europeans in the framework that has been established,” Rice said when asked about the pensions issue. “We do not have a financial arrangement with Greece so we are not engaged in the details of the ongoing discussions,” he added. 

The IMF “does not impose policies on countries,” he said, adding that the Fund does, however, offer its analyses and assessments. Rice siad the IMF encourages Greece to use all the tools at its disposal to promote growth-friendly policies that also contribute to social cohesion.