Greece’s government will not cut pensions again even if its international lenders demand it, the country’s labour minister told Reuters on Thursday, saying the income of the weak will be protected.
Athens remains determined to implement existing bailout reforms it has signed up to, however, Giorgos Katrougalos said in an interview.
Hanging onto a fragile parliamentary majority, the government wants to conclude its first progress assessment on fiscal targets and pension and tax reforms in order to start talks on debt relief – something it hopes will persuade angry Greeks that their austerity sacrifices are paying off.
But International Monetary Fund projections for a wider than expected fiscal gap – seen at 5 percent to 7 percent of gross domestic product by 2018, according to sources close to the lenders – have fuelled speculation Athens may come under strong pressure to slash pensions again.
Katrougalos dismissed such projections as “unreal” and said he hoped the issue would not be brought up during a bailout progress review with lenders, which he expected to resume “most likely next week” and be wrapped up “within March”.
“We hear things, sometime extreme, through leaks about the IMF which I hope won´t be brought to the negotiating table,” he said.
“Cutting pensions is a red line for us,” he said adding that more than half of Greece´s households relied on a pension to make ends meet.
Asked whether Athens would stick to this if the conclusion of the bailout review was at risk, he responded: “It wouldn´t be a red line otherwise.
“Greece has cut pensions 11 times since it signed up to its first European Union/IMF bailout in 2010, attempting to plug fiscal holes and revamp a fragmented pension system which helped plunge the country into its worst debt crisis in decades.
Prime Minister Alexis Tsipras, who signed up to a third bailout in August despite pre-election pledges of ending austerity, has promised Greece´s foreign creditors to cut the pension budget by 1 percent of GDP this year.
But loath to hurt the country´s 2.7 million pensioners again, he has opted for elevating social security contributions of employers, self-employed professionals and farmers, merging pension funds and capping high pensions.
“The planned reform is enough (to meet the target) and guarantees the system´s viability up to 2060,” Katrougalos said.
“The pension pool is much smaller compared with the past, but the income of the weak will be protected.”
The overall plan has triggered street protests by self-employed professionals including doctors and lawyers; farmers have been blockading roads and border crossings for weeks; ruling lawmakers have come under attack by protesters.
But the minister said he was confident the plan would be approved by parliament.
“Lawmakers are convinced about the necessity and the rightness of the reform. We won´t have a problem in passing the bill,” said the constitutional lawyer turned politician.
To appease farmers, Tsipras has offered concessions including keeping their heavily state-subsidised pension fund intact until 2021, and giving professional farmers the option to choose a lower bracket of pension contributions, at 16 percent of their income instead of 20 percent.
Both concessions, which are violating bailout terms, would be discussed during the review, Katrougalos said.
“We are not just trying to implement the bailout which is our obligation since we were forced to make a concession which has our signature. We are trying to implement a programme which will pull Greece out of the crisis through structural reforms that will protect the weak,” he said.
“It´s the first time there is a national initiative for such reforms, we have the ownership of the reforms, that is why Greece should have the support of its partners.”
