Creditors consider impact of acquiescing to Athens' request to suspend looming pension cuts measure

Monday, 05 November 2018 20:55
SOOC/Aris Oikonomou

By Vassilis Kostoulas

Greece’s creditors seem not particularly concerned over the prospect of the Tsipras government suspending a pre-legislated social security reduction that’s set for implementation on Jan. 1, 2019. The dominant view among creditors at present is that the markets are more interested in Athens achieving annual fiscal targets. As such, according to information gathered by with “N”, avoiding the pending austerity measure is deemed as more-or-less harmless for post-bailout Greece’s credibility, but under the unyielding condition that the annual target of a 3.5 percent primary budget surplus, as a percentage of GDP, is met or exceeded until 2022.

At the same time, however, creditors continue to question the benefits of utilizing a greater “fiscal space”, achieved mostly through achieving fiscal targets, on maintaining pension rates instead of opting for growth stimuli, such as cutting skyrocketing tax rates in the thrice bailed out country. 

An apparent unwillingness by Athens to delve into sovereign borrowing markets because of high yields affecting Greek bonds – as market jitters over Eurozone partner Italy continue – also doesn’t seem to faze creditors in the current period. Most creditors consider that such a prospect will take time, something guaranteed by a more than 25-billion-euro “cash buffer” accumulated by the Greek state over the past year from disbursed third memorandum loans. Moreover, Greece exited its bailout era at a more disadvantage position than the other EZ countries that required assistance.   

A calmer outlook also extends to Greece’s banking sector, despite the poor performance of bank shares on the Athens Stock Exchange. The view remains that Greece’s four systemic banks are sufficiently capitalized, although practically every top EU and Eurozone official has called for more drastic measures to reduce the massive load of NPLs burdening the domestic banking system.

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