Government mulls scrapping many planned social benefits to avoid pension cuts

The cutting of pensions as of 1 January, 2019, which has been passed into law, is causing heightened concern in the government due to the political cost, and ministers and SYRIZA cadres have already begun touting a possible suspension of the measure.

Ahead of the announcements in the prime minister’s major economic address at the Thessaloniki International Fair on 8 September, the finance ministry has been feverishly threshing out various alternative scenarios, in order to persuade creditors that the cuts are not necessary, either as a revenue-raising measure or as a structural reform.

The government has ruled out a “unilateral action” to suspend the cuts without the consent of creditors, as that would send the wrong signals abroad at a time when the markets are closely scrutinising the Greek economy.

Despite daily statements by government cadres that pension cuts will not or should not be implemented, the government is well aware that an agreement with creditors is necessary.
Painful quid pro quo

The government is also painfully aware that the precondition for a suspension of pension cuts is the scrapping of its much-advertised counter-measures, which were intended to counter-balance harsh austerity measures, imposed by the bailout memorandum, and to offer a breather to thousands of families.

The two billion euros needed to shelf the pension cuts cannot be drawn by the super-primary surplus (the amount that exceeds surplus targets).

Hence, the government will be forced to slash the “counter-measures” to save pensions.

Social benefits that may be abolished

The counter-measures that had been announced by the government – but not yet implemented – and that would be revoked to avoid pension cuts are as follows:

• The extension of the school meals programme
• The establishment of more childcare centres that would aid about 30,000 families who must now pay for childcare
• Investments worth 300mn euros from the Public Investment Programme
• OAED unemployment bureau programmes to reduce unemployment
• The 70 euros per month rent subsidies for low income families that are either servicing a mortgage or paying rent for their basic housing needs

The only benefit that would be saved under such a scenario is the child benefit.