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Greece

Greece resists IMF demands for more pension cuts, boasts better 2015 performance (Updated)

Greek Finance Minister Euclid Tsakalotos looks on before a parliamentary session in Athens, Greece July 22, 2015.

By Angeliki Koutantou

Greece cannot accept demands from the International Monetary Fund – one of its international creditors – to cut its pensions yet again in order to achieve a primary surplus target in two years, the finance minister said on Thursday.

Athens has proposed an overhaul of its pension system to make the system viable by increasing social security contributions. That plan has met strong opposition from farmers, who blocked highways for weeks in protest, and other professional groups.

Finance Minister Euclid Tsakalotos said the IMF did not doubt that the pension reform plan was serious but was concerned that it would fall short of the savings needed.

“It thinks that the figures don’t add up for us to reach (a primary surplus of) 3.5 per cent of GDP in 2018 and says that, since you have cut down on everything else, where are you going to find (money) if you don’t lower pensions further?”, Tsakalotos told parliament.

Pensions have been cut 11 times since Greece signed its first bailout in 2010. Tsakalotos said Athens could not lower them any more.

Disagreements between the IMF and Athens’s EU lenders over additional reforms Greece must implement to achieve its fiscal targets in 2018 are delaying the first review of its latest bailout, a hurdle the Greeks desperately need to clear to open the way for debt relief talks.

Greece estimates that it faces a fiscal gap of 1 per cent of gross domestic product by 2018, while EU lenders estimate it will be around 3 per cent of GDP and the IMF puts the gap at at least 4.5 per cent, according to sources.

Tsakalotos and deputy finance minister George Chouliarakis chided the IMF on Thursday, saying it should spell out why it saw a much bigger fiscal shortfall, since the country’s economy last year had performed better than projected in the bailout.

“The average estimate when we were discussing it was for GDP growth of -2 per cent and now we know it will be between -0.4 and -0.7 per cent,” said Tsakalotos.

Greece was also seen achieving a primary budget surplus of 0.2 per cent of GDP last year, while the reform programme in August had projected a primary budget deficit of about 0.25 percent, Chouliarakis said.

The Fund is also pushing the EU lenders – the European Central Bank, the European Stability Mechanism and the EU Commission – to offer Greece more generous debt relief to make its reform programme more sustainable, Tsakalotos said.

He said the delay was having a political and economic cost and could hamper the reforms aimed at getting the Greek economy back on track to growth.

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