Greece on a collision course with creditors after vowing not to slash pensions

[FriendlyFire]

Greece on a collision course with creditors after vowing not to slash pensions

Athens maintains it will not cut pension spending as part of reforms demanded by the Troika

Greece has promised not to implement controversial cuts to pensions, putting the debtor nation on a collision course with international lenders just months into a new bail-out programme.

Athens' left-wing Syriza government said it would not slash expenditure on its main and supplementary pensions as part of a reform plan submitted to international lenders on Monday night.

But pensions spending has proven to be the main sticking point for Greece and its Troika of creditors - the European Commision, the European Central Bank, and the International Monetary Fund - during nearly a year of tortuous negotiations.

The IMF has pushed hardest for bold cuts to the govenment's pensions outlay, leading to Greek prime minister Alexis Tsipras demanding that the Fund take no further part in the country's bail-out deal.

Instead, Athens has proposed an increase in employee and employer contributions and will reduce the amount people will receive in future pensions by up to 30pc.

Greeks have seen a 40pc fall in their pension provision over the last five years - a shrinkage that has been ruled unconstitutional by the country's highest administrative court.

Mr Tsipras has warned that he will not submit to "unreasonable demands" having signed up to an onerous €86bn bail-out in August.

His government is hoping to satisfy lenders' demands by carrying out reforms of "equivalent fiscal impact" in a bid to protect pensions for the poorest in society.

http://www.telegraph.co.uk/finance/...itors-after-vowing-not-to-slash-pensions.html

Greece dosnt have to slash pensions at all, it just needs to find the Euros to pay the said pensions. More employee contribution isnt going to be enough, the numbers dont match up.

Pension reform was suppose to have been done with the first bailout so I expect Greece is going to get some capital control punishment before it will have to cave into the inevitable.

 

[Agent327]

Pensions have been under duress in countries that don't have Greece's budget overspending problems. It will be interesting to see how to Greek government plans to pay for said pensions while still meeting its agreed terms.

 

[REDY]

Syriza does not want it, Greeks does not want it, it is against Greek constitution according their court. Greeks are great in getting money without effort and its clear that these money will be paid to creditors by EU doesnt matter what. Tsipras would have to be crazy to change something on this.

 

[classical_hero]

They can force a default and Greece will instantly become poor and they won't be able to afford their pensions. Either they do it this way or they will lose much more if they refuse and still have to reduce pensions.

 

[FriendlyFire]

So Greece is planning to cut pensions by 50% ?
As a I suppose fall back plan if it cannot find money to pay for the pensions.

The warning came just days after Athens got €1bn under the terms of its third bail-out programme. The creditors — the European Commission, the European Central Bank, the International Monetary Fund and the ESM — finalised a third debt-rescue programme in August worth €86bn after Greece looked to be on the brink of exiting the eurozone.

"The creditors have to know that we are going to respect the agreement to the letter, but that doesn’t mean we are going to succumb to unreasonable and undeserved demands," Mr Tsipras told Real News newspaper.

"We have no commitment to find the money exclusively from pension cuts. On the contrary, the agreement provides the option of equivalent measures, which we have already processed."

He admitted though that the pension system, which is "on the brink of collapse" needs to be overhauled. The labour ministry is working on a social security system under which state-guaranteed pensions will be reportedly cut by half — to a minimum of €384 — and the rest will depend on a person’s income and years of social security payments.

"If we don’t face the problem of the social security system today, in a year we won’t be able to pay pensions," senior labour ministry official Andreas Nefeloudis told Mega TV channel.

http://www.bdlive.co.za/world/europ...00m-sale-as-tsipras-digs-in-heels-on-pensions

 

[warpus]

How do Greek pensions compare to other western countries? Last I read about it was a couple years ago, and they seemed very very very generous, a lot better than what we get here.

Back then my position was "I don't feel sympathy here, these people had it too good and they can't afford to pay for it, so..", but it would be easier to feel better about that position (or to change it) with some hard numbers.

 

[Zelig]

Policies that incentivize governments to have citizens die more quickly probably aren't good.

 

[Yeekim]

Except in fiscal sense. [emoji14]

 

[El_Machinae]

It's very hard getting people to spend their pensions in ways that augment growth, too. Pensions are going to be a demand-side support. Spending locally allows a multiplier effect, but this just slows the rate at which money is leaving the country. Because Greece is on the Euro, the only way to bring more Euros in is for Greeks to sell things that other countries want.

Ostensibly, the pensioners could buy stuff that helps create demand-support for companies that are also creating exports. But then, this spending needs to be beneficial for the pensioner too. Very not easy.

 

[REDY]

How do Greek pensions compare to other western countries? Last I read about it was a couple years ago, and they seemed very very very generous, a lot better than what we get here.

Back then my position was "I don't feel sympathy here, these people had it too good and they can't afford to pay for it, so..", but it would be easier to feel better about that position (or to change it) with some hard numbers.

From cited article:

 

[Daw]

Redy, bit isn't the chart reflecting "what they can afford" rather than "what they pay"? I mean, it is given in the % of GDP. Greece spending 16.2% of GDP seems to be more than Germany spending 10% of GDP, but their GDPs are different to start with. And then it has to be per capita, no?

 

[warpus]

REDY, thanks for posting, I should have read the article I guess.

Daw, I think the point is that Greece is trying to prop up a pension system that is unsustainable. They can't afford it, but they want it to continue. Something's got to give.

If their pension contributions were similar to, I don't know, let's say Slovakia's, and they were asked to cut them further, to even smaller amounts.. I think you could then say: "Wait a second, you punishing the Greek people like this doesn't seem fair, they deserve a reasonable pension".. but looking at that graph, they seem to have a huge problem on their hands, and they don't seem to want to do much about it.

 

[Daw]

Daw, I think the point is that Greece is trying to prop up a pension system that is unsustainable. They can't afford it, but they want it to continue. Something's got to give.

If their pension contributions were similar to, I don't know, let's say Slovakia's, and they were asked to cut them further, to even smaller amounts.. I think you could then say: "Wait a second, you punishing the Greek people like this doesn't seem fair, they deserve a reasonable pension".. but looking at that graph, they seem to have a huge problem on their hands, and they don't seem to want to do much about it.

I understand your point, but I am not ready to conclude the system is unsustainable until there is a proof of that. Currently, it's an assumption, which may turn out to be accurate in fact, I don't know.

 

[warpus]

Look at the graph, they are spending way too much on their pensions, given their economic problems. Looks like a clear problem to me, but what other information do you think you need?

 

[Cheetah]

What else they are spending money on, I'd think. If they for instance spent 10% less of their GDP on military than Germany did, then that would weigh up for the discrepancy.

Real number, but accumulative and per capita, would be nice. Also price level comparison between the countries (Big Mac index?) would be helpful.

 

[warpus]

It would also help to see what exactly 1 single person gets, under their scheme, and how this compares to other western European countries. But last I compared it to what we get in Canada, the Greek pension system seemed like paradise - retire super early, etc.

 

[Cheetah]

Yeah, the early retirement thing is a rather easy thing to compare, and Greece does come out favorably there (or unfavorably, as the case might be).

 

[Yeekim]

To be fair, reportedly they've got rid of the worst excesses.

 

[luiz]

The very sad irony of Greece is that by electing bellicose Syriza and rejecting the bailout package that was agreed by the previous government, they actually ended up with a worse package than the one they rejected.

Unfortunately for Greece (and also for my own country, actually), voters don't get to reject basic accounting. Reality does not adhere to the democratic will.

 

[classical_hero]

Also the previous government by doing the cuts had actually got Greece growing again, all be it, very slowly, but it is better than what happened as soon as Syriza got into power and an economic collapse happened as a result. Quite frankly I have no sympathy for the Greek people because they got themselves into this mess and don't want to make the sacrifices needed to get back on track. They will have to cut pensions and government spending one way or another. The best and less painful method is in the Eurozone, but they are doing their best to antagonise their creditors who will eventually decide to cut their losses and watch Greece free fall into fiscal oblivion.