Pension cuts remain a sore point in talks between gov’t, creditors

Pension cuts due to come into effect in January remain a sore point in talks between Greece and its international creditors, with both sides apparently unwilling to compromise amid speculation that the deadlock could trigger early elections. 

Government officials are still determined to convince the creditors to suspend the measures, despite last week’s furore over a false report suggesting that foreign auditors were willing to back down.

The report, by the state-run Athens-Macedonian News Agency, prompted a firm denial by the European Commission. The denial appears to have come as something of a surprise to the government, which had regarded the EC as an ally.

European Economy and Monetary Affairs Commissioner Pierre Moscovici had suggested that there could be some flexibility in reforms. However, EC President Jean-Claude Juncker and other high-ranking European officials made it clear last week that all agreed-to reforms must be enforced. 

In comments to Kathimerini, one European official indicated that the suspension of the pension cuts would be interpreted by markets as an instance of backtracking by Greece on its pledges. This could have negative repercussions, the official said. 

Despite the risks, the government is considering suspending the pension cuts unilaterally if it cannot persuade the creditors to agree to the change, Kathimerini understands.

Officials will continue with negotiations and will likely draft the budget for 2019 with the pension cuts, according to sources, but will seek to suspend them at a summit of eurozone finance ministers in November.

If that fails, Prime Minister Alexis Tsipras may proceed to revoke the cuts unilaterally, a move that is likely to spark early elections.