According to government sources, no insistence that pension cuts were ‘structural’ from institutions
None of the institutions at the staff-level talks with the government’s economic team in Athens on Wednesday, including the IMF mission, insisted that the pension cuts legislated to kick in as of January 2019 are a “structural measure”, a government source said.
According to the source, Finance Minister Euclid Tsakalotos and Alternate Finance Minister George Chouliarakis proposed that the measure was not fiscally necessary and presented data showing that the “fiscal space” available in 2019 exceeded the 700 million euros envisaged under the Medium-Term programme. The government side noted that this could allow the cancellation of the legislated pension cuts, on the one hand, and the implementation of some of the positive measures, on the other hand.
According to the government source, the government could also implement some of the positive measures over a space of four years, which would create additional fiscal “breathing space”. The same source said it was a “pleasant surprise” that none of the institutions had insisted that the pension cuts were a structural measure and that the discussion was held from a purely fiscal standpoint, with the government estimating that not implementing the measure will not lead to missing the target for a 3.5 pct of GDP primary budget surplus in 2019.
Final decisions will not be made at this time, however, but at the Eurogroup meeting in November.
Regarding the possibility that Athens’ request will be refused, the government official said there should not be any problem provided there was agreement on the size of the fiscal space and the non-structural nature of the measure.
We presented tables with the viability of the pension system without the pension cuts…I do not believe there is some minister, especially a social democrat, that wants pensions to be cut no matter what,” the source said.
Meetings with the institutions’ teams will continue on Thursday, focusing on labour issues (minimum wage, undeclared labour), financial issues (non-performing loans, out-of-court settlement) and reforms (privatisations and energy).
Friday will be devoted to fiscal issues and the missions will depart after issuing a first announcement. This will be followed by the European Commission’s first report in the framework of Greece’s post-programme surveillance in November, to be succeeded by another three at the end of February, end of May and in November 2019.
The IMF will issue two reports, since it is participating more as an observer.