Coalition working on scenarios for pension cuts but also pressing IMF over forecasts

21 February 2016
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The Greek government is working on scenarios that include cuts to pensions above 1,000 euros a month in a bid to secure an agreement with its lenders on the bailout review, Kathimerini understands.

However, at the same time, Athens has called on the International Monetary Fund to detail in writing why it believes 4.5 percent of gross domestic product in fiscal measures are needed between now and 2018 as the government believes the figure is much lower.

Although Prime Minister Alexis Tsipras has repeatedly insisted that he would not cut main pensions in order to secure a deal with the institutions, it has been made clear to the coalition that without such a move there will be no agreement. As a result, government officials have been crunching numbers in recent days in the hope of finding a formula that will be acceptable to all sides.

One of the options that has been considered is to make progressive reductions to pensions (main and auxiliary) totaling more than 1,000 euros a month. This would deliver savings of 400 million euros. It is not clear, though, if Tsipras would be able to ensure the support of his MPs and party in general for such a measure given his previous pledges. Another option being examined is to reduce pensions for early retirees by 5 to 10 percent over a three-year period. This would bring in savings of up to 800 million euros over the three years.

For the time being, though, Athens is pressing the IMF and the director of its European Department, Poul Thomsen, to justify their claim that Greece will need to adopt measures worth 4.5 percent of GDP, or some 8 billion euros, for the country to be in the position to hit the primary surplus target of 3.5 percent of GDP it has been set for 2018.

The Greek government argues that, contrary to the IMF’s estimate of a primary deficit of 0.6 percent of GDP in 2015, there was a surplus of 0.2 percent and that the measures needed over the next three years do not amount to more than around 1.5 percent of national output.

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