Berlin appears to be shifting on pension cuts

With the final decision on pension cuts expected to be taken at the December Eurogroup, it emerged on Tuesday that Berlin is reportedly willing to drop its objections to Greece’s request to scrap the measure, slated for January, under the condition that fiscal targets will not be compromised and as long as it is not seen as a precedent to roll back reforms. 

Under this scenario, Athens must substantiate without a hint of a doubt that the aim of a 3.5 percent surplus for 2019 will not be jeopardized by the measure’s non-implementation.

German officials reportedly said that “the figures that will be presented must be sacred and unchangeable like the commandments received by Moses.” 

Analysts say German Chancellor Angela Merkel wants to avoid, at all costs, a situation whereby Greece will come up short with regard to fiscal targets in 2019, just a few months after its bailout exit. 

The concern is that if Greece fails to meet its targets it could spark international turmoil and compromise its effort to tap markets – a fundamental objective of the government which was reiterated on Tuesday on state-run ERT TV by Finance Minister Euclid Tsakalotos. 

“We have a plan to go back to the markets,” he said, adding also that he is “very optimistic” that the pension cuts will not go ahead. 

However, Berlin and the eurozone do not want the scrapping of the measure to be seen as a unilateral action by Greece as this could pave the way for a crisis in the bloc – which is the last thing EU officials would want given the unfolding financial situation in Italy. 

ERT said that the decision on the pensions may be made at an extraordinary Eurogroup meeting on November 19, as the final text will have to be submitted in Parliament by November 21. 

The first draft of the 2019 state budget tabled in Parliament by the Finance Ministry on Monday was based two alternative scenarios – one with the planned pension cuts along with offsetting measures, and one without them, apparently trying both to appease its creditors and please its voters. 

Up until two weeks ago most European capitals were completely opposed to the non-implementation of the pension cuts. The European Commission, which is usually more favorably inclined to Greece’s position, struck a cautious tone on the issue.