Greek tax and pension reforms have to be approved by the country’s lawmakers on Sunday if Athens is to get the next, previously delayed, tranche of more than five billion euros of bailout cash.
That money would then be used to pay back earlier loans from the International Monetary Fund, European Central Bank bonds which are due to mature in July and Greek government day-to-day expenses such as wages.
Athens has been told to cut its annual pension bill – one of the eurozone’s most expensive – by 1.3 billion euros.
Labour Minister George Katrougalos told a parliamentary meeting on Thursday: “We’re in a situation where the nation’s wealth is much smaller – we are 25 percent poorer than we were in 2010 – and so we have a smaller piece of the pension pie to distribute. But for the first time it will be done in a fair way.”
Greek politicians have the impossible task of satisfying the electorate and the eurozone’s finance ministers – known as the Eurogroup. They are expected to discuss the stalemate on May 9 and at the same time talk about debt relief measures, long-desired by Athens.
Prime Minister Alexis Tsipras has called for some type of debt relief to help Greece as it introduces the reforms.
IMF head Christine Lagarde has also urged the eurozone finance ministers to start talks on Greece’s debt relief together with discussions on reforms, according to a letter published by the Financial Times.
‘Unaffordably generous’ pensions
The proposed legislation going before parliament on Sunday would raise social security contributions, increase income tax for top earners and cut higher levels of pensions by up to 40 percent.
Even after monthly payments have been cut 11 times since 2010, in some cases pensioners are now getting more money than the person who replaced them when they retired, and even under the new system some pensioners will earn more than 100 percent of their final salary.
Poul Thomsen, Director of the IMF’s European Department which is overseeing the Fund’s programmes in Greece, recently said despite reforms in 2010 and 2012 the country’s pension system remains “unaffordably generous” in his blog.
Thomsen pointed out: “The standard pensions in nominal euro terms are broadly similar in Greece and Germany, even though Germany – measured by the average wage – is twice as rich as Greece.”