The Greek government, as expected, on Wednesday broached the issue of suspending a planned reduction in social security spending – set for of Jan. 1, 2019 – in the first official contacts with creditors’ representatives, who returned to Athens this week for the first time since the third bailout concluded on Aug. 20.
Press reports in the Greek capital on Wednesday afternoon cited an unnamed government official as saying that the finance ministry’s leadership, namely, Minister Euclid Tsakalotos and Alternate Minister Giorgos Chouliarakis, presented auditors with arguments to postpone or even suspend the looming austerity measure.
The main argument put forth by the leftist-rightist government, one that has been floated in Athens for months now, is that “fiscal space” in 2019 will be greater than 700 million euros, the forecast included in a previous medium-term adjustment program.
The Tsipras government has already passed into law the social security reduction, achieved by applying legislation passed after 2016 on all beneficiaries who retired or received benefits before that year. In a rough estimate, some 30 percent of pensioners in Greece will see a monthly reduction in their benefits if the measure is implemented; 50 percent will see no difference, and 20 percent, the government claims, may see small increases.
Nevertheless, the prospect of another round of pension cuts – even as part of a measure it has signed and ratified in 2016 – is anathema to a poll-trailing Tsipras government heading into an election year.
According to the same widely quoted source on Wednesday, the government is willing to eschew some of the countervailing measures foreseen for 2019, which are linked to the specific austerity measure and in meeting fiscal targets, particularly the ambitious 3.5-percent primary budget surplus goal (as a percentage of annual GDP).
While not totally abandoning the countervailing measures, the compromise proposed by the coalition government is implementation over a four-year period, rather than in 2019.
Two significant factors are still pending: the exact size of the primary budget surplus for 2018, as the Tsipras government has boasted that it will exceed 4 percent of GDP – itself the product of an ongoing “tax tsunami” in the country and curtailed public investments.
The other factor is the exact costs of recent spending measures announced by Alexis Tsipras over the weekend during the inauguration of a major trade fair in Thessaloniki.
