Dombrovskis to 'N': Freezing pensions until 2022; creditors' 'OK' conditions for permanent suspension of pre-legislated cuts

Thursday, 22 November 2018 09:09


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By Vassilis Kostoulas

"Freezing" pension rates in Greece until 2022 and a "permanent" suspension of a pre-legislated cuts in pensions has to be done in dialogue with creditors even if Greece has fiscal space to do so, EU Commission Vice-President Valdis Dombrovskis told "N" this week.

In an exclusive interview, Dombrovskis, who holds the Euro and Social Dialogue portfolio on the Commission, detailed the framework before the pending Dec. 3 Eurogroup meeting. Eurozone finance ministers to have the last say on Athens' pressing request to avoid the pension cuts. The latter, which would affect up to one quarter of pensioners in the country, are scheduled for implementation  on Jan. 1, 2019. Moreover, he forecast that state spending for social security and related benefits in Greece by 2030 will ease to 13 percent of GDP.

"What we are currently discussing is indeed abolishing of the pre-legislated cuts in pensions and ensuring the freeze of pensions until 2022. It must be said that Greece has the fiscal space necessary not to do those pre-legislated pension cuts. So what we are emphasising here is that even though Greece has this fiscal space it has to be done in dialogue with creditors, with other eurozone countries because it is a pre-condition for debt measures to be implemented to alleviate Greece's debt servicing burden that post-programme fiscal targets and structural reform agenda is on track. So it needs to be done in dialogue but we see the fiscal space to do so".

Referring to another austerity measure that the Tsipras government -amid a looming election year- wants to desperately avoid, Dombrovskis said the Commission has not received any notification by the Greek side over possible changes in a decision to lower the annual tax-free income ceiling in the country. The measure has already been legislated, and is set for implementation on Jan. 1, 2020.

In terms of challenges faced by Athens, he acknowledged that the rate of covering the state's arrears to the private sector remains a "thorn", while advising prudence as far as the rate of hirings in public sector is concerned.    

Asked about a return to the markets by Greece for its sovereign borrowing needs, Dombrovskis said that, in practice, such a prospect will be gradual. Nevertheless, he actually added that the Greek state should test the waters with bond issues during the period that it still retains a "cash buffer".

Touching on the increasingly menacing issue of "bad debt" held by Greece's four systemic banks, he said the Commission is clearly positive over the prospect of establishing a form of "bad bank" to manage NPLs, while noting that talks with Greek officials are still in the early stages.

On the fiscal front, he ruled out any discussions over a revision of the ambitious annual primary budget surplus targets - as a percentage of GDP - that the leftist-rightist coalition government has committed the country to achieve over the next few years.

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