Creditors concerned about court decisions’ impact on 2019 budget

The Greek budget for 2019 may have received the nod from the European Commission, but off the record the creditors appear concerned about its smooth execution, mainly due to court decisions on pensions.

Senior eurozone officials say that the government has underestimated the issue of compensation for pensioners, which could seriously undermine the budget, as retroactive payments to pensioners may reach up to as much as 4.5 billion euros per year.

They also acknowledge that the Commission has noted the issue in its report and warned that Athens will require structural measures if the verdicts are confirmed, but Brussels has not highlighted the seriousness of the matter. Given that there is a series of such cases pending, there are fears this may turn into an avalanche of claims.

“The budget holds a bomb that has not been assessed properly,” eurozone officials recently said in private discussions. This bomb may actually go off in the hands of the next government, which certainly worries New Democracy.

The court decisions are not the only unfathomable threat to the budget: Excess spending ahead of the elections is generating nervousness, as the primary surplus of the 2019 budget is projected at 3.6 percent of gross domestic product, just above the target of 3.5 percent, while the margin for extra expenditure is almost zero.

The feeling in eurozone capitals is that the first European Commission review has been quite lenient, compared to how Greece was treated in the past. However, the second report will be more important, as it will be combined with the first installment of the 600-million-euro disbursement to Athens of eurozone central banks’ profits from Greek bond holdings, as long as the country fulfills its obligations.