Regling says Greek fiscal room not enough to fully scrap pension cuts

The fiscal room available in Greece this year is not enough to completely discard planned pension cuts agreed with the country’s creditors, the head of the Eurozone’s rescue fund said on Tuesday.

The Greek government wants to avoid implementing the additional cuts which would apply as of January 2019, claiming its improved economic position shows they are not necessary.

Speaking at a press briefing in Luxembourg, Managing Director Klaus Regling also said Italy’s debt problems were different from those of Greece, which had to be bailed out three times.

Italy has a current account surplus while much of the Italian debt is funded by the country, he said.

Regling expressed concern over Italy’s fiscal plans, but added there was no cause for panic as contagion to other European countries had so far been “very limited.”

He added that “one or two” Greek banks had also partly been affected by Italy, but noted that problems at these banks were also caused by very high levels of bad debt.

Asked when it would be a good time for Greece to tap financial markets, he said there is no urgent need and that the country could wait for two years.

He said interest rates are currently higher than a few years ago, which is influenced by what is happening in Greece and other countries like Turkey.