Greek pension cuts in balance as EU/IMF inspectors visit
By Lefteris Papadimas
ATHENS, Sept 12 (Reuters) - Hopes in Greece that it will
have fiscal leeway to cancel unpopular pension cuts due next
year are in the balance, sources said on Wednesday, as the first
inspection visit by its former lenders since it exited its
The country emerged from the biggest economic rescue in
history in late August after almost nine years of creditor-
Its former international lenders at the European Union and
International Monetary Fund have promised to ease repayment
terms on its huge debt pile, proportionally the biggest in the
bloc. Athens has in exchange agreed to hit specific fiscal
targets up to 2022.
The lenders' inspectors began their first assessment of
Greece's progress on those measures on Wednesday.
"It seems that Greece will outperform its fiscal target by
about 0.5 percentage points this year and that gives the
government some space for manoeuvring," a source close to the
lenders told Reuters, adding that the 2019 budget would also be
on the agenda.
So far it has beaten its targets, helped by an economy that
has returned to growth after a long recession.
Athens has promised to achieve an annual primary budget
surplus - which strips out debt servicing costs - of 3.5 percent
of GDP up to 2022. With that in mind it has legislated pension
cuts and tax hikes to take effect in 2019 and 2020 respectively.
On Saturday Prime Minister Alexis Tsipras said that, hinging
on Greece's economic progress, it would not be necessary to
implement the pension cuts next year, arguing that such a move
would not be a structural reform and could hurt growth.
Greece has slashed pensions at least 12 times since 2010.
The leftist leader was catapulted to power on a promise to
end austerity but was forced to sign up to a new bailout
instead. With national elections due next year, his party is
about 10 points behind the conservative opposition.
The prime minister also announced tax relief measures over
coming years, including gradual reductions of corporate tax,
value added tax and a property levy..
Finance ministry officials discussed a reversal of the
planned pensions cuts with the inspectors on Wednesday, a
ministry source said.
"We told them that the implementation of the measure is
unnecessary," the source said, adding that the climate was
positive during the talks.
Athens is hopeful of winning support for the move from its
euro zone partners but the IMF, which says that maintaining a
high primary budget surplus is a tough task, may disagree.
Another source with knowledge of the talks said that a final
estimate of next year's fiscal outperformance could give Athens
the option of postponing the cuts.
The inspectors have planned four annual assessments and
their findings will be presented to euro zone finance ministers.
A positive assessment would also help Athens receive profit
returns from bonds held by euro zone central banks currently
amounting to about 4 billion euros ($4.64 billion).
($1 = 0.8624 euros)
(Writing by Renee Maltezou; editing by John Stonestreet)
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