Report Says Germany Won’t Object to Pulling Back Greek Pension Cuts

Pensioners take part in a rally outside the Labor Ministry in Athens, on Tuesday, Nov. 13, 2018. (AP Photo/Petros Giannakouris)

In a turnabout, Germany – the biggest contributor to 326 billion euros ($368.45 billion) in three bailouts for Greece – plans to back Prime Minister and Radical Left SYRIZA leader Alexis Tsipras’ plan not to go ahead with more pension cuts on Jan. 1, 2019 as he agreed with the country’s international creditors.

Chancellor Angela Merkel hadn’t relented on austerity and pension cuts during the disbursement of the bailouts that began in 2010 but with Tsipras far behind in polls to the major opposition New Democracy, which objects to austerity after supporting it while ruling earlier, won’t stand in way of letting him delay but not cancel the reductions, said the Bloomberg financial news agency.

But an unnamed source familiar with the negotiations said ruling party deputies in Germany may block the release of the European Central Bank’s earnings from Greek bond holdings in response to the failure to reduce Greek pensions.

Tsipras’ hopes to cancel pension cuts he agreed to impose on Jan. 1, 2019 will be in the hands of the country’s creditors Nov. 15 when the Euro Working group (EWG) will meet.

Negotiations with the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM) are in the last stages over conditions attached to a third bailout, this one for 86 billion euros ($96.56 billion).

Those included the new pension cuts he swore to reject but then agreed to implement to get the rescue package in the summer of 2015 and keep Greece in the Eurozone. He also wants to cancel coming new taxes on previously exempt low-and-moderate income families and individuals set to begin in 2020.

With elections required to be held by October, 2019, Tsipras and his party have fallen far behind the major opposition New Democracy Conservatives they unseated almost four years ago and he’s been frantically trying to regain favor, saying the pension cuts won’t be needed because a primary surplus goal of 3.5 percent of Gross Domestic Product (GDP) will be surpassed.

That doesn’t include interest on three bailouts of 326 billion euros that began in 2010, the cost of running cities and towns, state enterprises, social security, some military expenditures and was achieved by holding back payments to people and companies owed money by the state.

Greece’s state news agency ANA-MPA, citing a source that wasn’t identified, said the two sides are close to reaching a decision on what kind of fiscal space the government could have. Ironically, SYRIZA is now in favor with the creditors for imposing more austerity while New Democracy leader Kyriakos Mitsotakis said he would oppose the conditions if elected.

Tsipras also wants to give big handouts and hire at least 10,000 workers in what rivals and critics said was a desperate bid to buy votes, a common practice by dominant parties in Greece.