As pension reform crunch nears, Greek coalition looks fragile

Greek Prime Minister Alexis Tsipras's governing majority is looking fragile as crunch time approaches for a pension reform that will test his resolve to impose painful measures to satisfy Athens' international creditors.

The coalition of Tsipras' leftist SYRIZA party and the right-wing nationalist Independent Greeks has a majority of just three seats in parliament, and pro-European opposition parties that voted for Greece's latest bailout are publicly refusing him any help on the toxic pension issue.

The overhaul, which must deliver savings worth 1 percent of gross domestic product or 1.8 billion euros next year, is the most sensitive of a raft of reforms demanded by the euro zone and the International Monetary Fund in return for up to 85 billion euros in aid in the country's third bailout since 2010.

Trade unions have staged two 24-hour general strikes against further pension cuts and Tsipras has promised there will be no across-the-board reduction in benefits for retirees.

Tsipras says most of the savings will be achieved by ending early retirement under a law enacted last month, leaving about 600 million euros more to be saved.

"Hell, there must be ways to find those 600 million euros. It's not 6 billion, it's 600 million," he said in a television interview this week after critics said he would struggle to avoid a new round of unpopular pension cuts.

Instead the government is proposing to increase social security contributions, mostly by employers – a move the lenders warn would deter job creation and set back economic recovery, setting the stage for tough negotiations next month.

Wars of words

As the deadline approaches, Tsipras launched an attack on the IMF this week, saying it was making unconstructive demands on both sides and should make up its mind whether it wanted to stay in the Greek program.

That in turn triggered another war of words with Germany, the biggest European creditor, which insists the global lender must stay in the program to enforce tough discipline and to reassure German lawmakers.

Sources in SYRIZA say some deputies are unhappy at the prospect of a reform that will entail merging the country's multiple underfunded pension funds and reducing state subsidies to the system and is bound to lead to lower benefits for many.

No one knows how many, if any, of the grumblers may refuse to back the law.

Aides say Tsipras will negotiate hard with the lenders but ultimately will face down any opposition in his own party and push the pension reform through parliament so that Greece can start negotiations with the euro zone on debt relief in March.

Tsipras dismissed talk of a wider coalition in the state TV interview, saying his 153 seats in parliament were more solid than the 225-seat majority which had initially supported a 2011-12 interim government of technocrat Lucas Papademos, which crumbled within six months.

Political sources say the prime minister has put out feelers to a small opposition party, the Union of the Center, which has hinted its nine lawmakers might let the legislation pass.

Despite their tough public stance, other opposition parties could well abstain or absent themselves in sufficient numbers to ensure passage of the pension bill, the sources said.

"No one has an interest in having another election now," said a senior political source, noting that the conservative New Democracy is in disarray ahead of a leadership election next week, and the center-left PASOK party is wary of taking any new responsibility for unpopular austerity measures.

The source said that while his "central scenario" was that Tsipras would ram the pension reform through, there was a risk that the prime minister would decide to play for time, delaying any reform until pressure mounted and the threat of another destabilizing Greek crisis began to affect financial markets.

A source on the lenders' side said creditors could also play things long to increase reform leverage over Greece and push back debt relief talks until after sensitive regional elections in Germany and a general election in Slovakia in March.

While Tsipras remains Greece's dominant politician, with no challenger in sight, Athens is awash with rumors of an "ecumenical government" combining technocrats with consensual politicians if he loses his majority.

[Reuters]