Greece urges international lenders to let it delay pension reform plan - sources

24/10/2014

By Lefteris Papadimas and Renee Maltezou

Greece is pressing its EU/IMF lenders to exclude a contentious pension reform plan from the backlog of reforms it must complete before exiting its bailout program, in a bid to avoid a public backlash, two officials familiar with the matter said.

Athens is in the middle of what is expected to be the final review of progress on pledges made under its 240 billion euro bailout and is under pressure to finish all outstanding reforms before receiving a final aid tranche of 7.2 billion euros.

But the Greek government is resisting a commitment to pass a law merging supplementary pension funds by November because the plan would effectively mean a further cut in pensions for many Greeks - undermining the government's stated pledge to avoid new reductions in wages and pensions, one Greek official said.

The government has sent a document to the EU/IMF outlining its case for removing pension reform from the current review, arguing that the Greek pension system - which was already overhauled in 2010 - is viable until 2060, the official said.

A senior Greek government official cautioned that Greece and its EU/IMF lenders had yet to officially discuss the issue of pension reform in the current review and that documents on pension system viability had been exchanged in previous talks.

Another source close to the matter and an official close to the EU/IMF troika said the IMF was pushing Athens to complete all reforms including pensions before the program ended but that there was room for flexibility depending on progress made by Greece on other fronts.

"This is a very sensitive issue for the Greek government politically," the official close to the lenders said.

Greece in 2010 passed a law cutting pension benefits, curbing widespread early retirement and increasing the number of contribution years needed to receive a full pension.

Repeated rounds of austerity imposed at the behest of EU/IMF lenders have already taken a toll on Prime Minister Antonis Samaras's government, which has lost a junior ally and suffered several lawmaker defections since coming to power in 2012.

The government - which has warned of austerity fatigue among lawmakers - is now trying to secure its survival by exiting the bailout a year ahead of schedule, in the hope of winning enough support to scrape through a presidential election next year.

But Athens first needs to successfully conclude the current review, which is expected to involve tough negotiations on other areas as well, ranging from a plan for tackling bad loans at Greek banks and a unified wage scheme for public workers.

EU/IMF inspectors began the review last month but paused it until after results of a Europe-wide bank health check are announced on Sunday.

The government hopes to conclude the review by Dec. 8, when a meeting of euro zone finance ministers is held.

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