One of Greece’s international lenders, the Washington, D.C.-based International Monetary Fund (IMF) said Prime Minister and Radical Left SYRIZA leader Alexis Tsipras must impose – as agreed – more pension cuts beginning Jan. 1, 2019, a prospect he’s desperately trying to stop.
With his popularity having hit near rock bottom after more than 3 ½ years of reneging on anti-austerity promises, Tsipras wants to halt the additional puts he agreed to implement after swearing he never would.
Elections must be held in Greece by October, 2019 but he has seen his party fall more than 10 points behind the New Democracy Conservatives they unseated in 2015 as Tsipras is looking for ways to also provide handouts in what critics said was a transparent bid to buy votes.
He also wants to wiggle out of hitting previously exempt low-and-moderate income families with taxes, set to begin in 2020 but the IMF said that plan, as well as the pension cuts are necessary although acknowledging it’s now up to the other creditors, the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM) who put up a third bailout in 2015, for 86 billion euros ($98.14 billion).
The IMF took part in two first rescue packages of 240 billion euros ($273.88 billion) that began in 2010 after a then-ruling PASOK Socialist government asked for aid to prop up an economy brought to its knees by generations of wild overspending and runaway patronage.
In a briefing to reporters in Washington, IMF spokesman Gerry Rice said that a planned round of further cuts to pensions was an agreed reform, as is the reduction of the tax-free threshold for income that will hit some of the poorest.
Ironically, he said that taxing low-and-moderate income people and families would free up fiscal space to offer tax relief and social welfare measures, much of it to the same people paying for it through higher and new taxes as the rich, politicians and tax cheats continue to escape a more than 8 1/2-year long economic and austerity crisis.
Rice said however that, The Fund no longer has a financial arrangement or program with Greece so clearly the main interaction now is between EU partners and Greece,” the Troika.
The government said fiscal targets could be hit without pension cuts because of a projected higher-than-expected primary surplus that doesn’t include interest on the loans, the cost of running cities and towns, state enterprises, social security, some military expenditures, and by delaying or not paying its own bills to those owed money by the state.
A final decision on whether the cuts slated for January will go ahead is expected to be taken at a critical meeting of Eurozone finance ministers in mid-November. European officials believe Greece will achieve a primary surplus of 3.2 percent of Gross Domestic Product (GDP) next year compared to an official Greek forecast of 3.6 percent, just over the creditors’ target of 3.5 percent.
ESM chief Klaus Regling commented recently that Greece will achieve some “fiscal space” but not enough to avoid enforcing the agreed pension cuts, however.
The IMF spokesperson also referred to the possible buyback of Greece’s IMF loan of 32 billion euros ($36.51 billion) as “one of many options” available to Greece for debt management measure, noting that the country has time because of a debt relief deal reached with the Troika giving the country more time to pay.