IMF to insist on pension cuts

The International Monetary Fund on Thursday issued a flat denial to the government’s request to cancel the implementation of the planned pension cut in January 2019, while Finance Minister Euclid Tsakalotos appeared reserved about Berlin’s attitude as he responded to investors’ questions in London a day after meeting his German counterpart.

IMF spokesman Gerry Rice categorically told a press conference that nothing has changed in the Fund’s positions on the pensions since the summer. The IMF considers the measure both structural and fiscal – unlike what the government claims.

The pension cut is a structural measure in the IMF’s view because it will improve the long-term prospects of the social security system. Also in fiscal terms it will create the space required to introduce more policies to support vulnerable social groups and ease taxation so as to bolster growth. Rice went on to stress the symbolism of the measure, saying that its implementation will send a clear signal that Greece remains on the path of reforms.

A little earlier Tsakalotos had said the exact opposite in London. Replying to investors’ questions, he said that averting the cuts would not affect the sustainability of the social security system because the old generation of pensioners – affected by the measure – will not be around anymore after 2030-40, so the measure is not structural, he claimed. On the fiscal aspect the minister said there is a margin not only for not implementing the cuts but also for certain growth-friendly measures, thanks to the excessive primary surplus. He added that the IMF does not insist that the measure is structural, but Rice refuted him a little later.

As for the contacts Tsakalotos had on Wednesday in Germany with his German counterpart Olaf Scholz, he spoke with great caution that gave no hint at all of a positive outcome: He said he hoped an acceptable solution would be found and that the discussion with the creditors would be “creative.”