Greek Court Rulings Bleed Primary Surplus, Recovery

Greece's hopes to get the economy going could be undercut by court rulings to repay worker salary cuts and lump sums that were slashed.

ATHENS – Greek Prime Minister Antonis Samaras’ game plan to get the economy going after after seven years of a deep recession have run into rulings from courts that the government must repay salary cuts to the military and emergency services – and now that big cuts in lump sums for pensioners are unconstitutional.

Samaras had said that he expects a primary surplus of as much as 1.5 billion euros ($2.07 billion) but the country’s highest court, the Council of State, reportedly will rule out the military cuts, costing the government some 500 million euros 500 million euros ($687.7 million) and has led other public workers to demand the same treatment.

Another major obstacle now for the government is that the Court of Audit also has deemed unconstitutional giant cuts in lump sum payments pensioners receive, up to 38 percent and more.

The court said the government can’t touch the money because it was deducted from workers salaries over the years for their retirement and belongs to the beneficiaries. That case will now before the high court, the Council of State, and, if upheld, could cost the government billions.

The cuts were part of austerity measures being imposed by successive governments on orders of the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) whose envoys this week resumed negotiations with Finance Minister Yannis Stournaras over 153 unsettled reforms and a hole in the budget of as much as 2.4 billion euros ($3.29 billion).

The developmentss came just as the government said it was close to a deal with the lenders who are putting up $325 billion in two bailouts that run out this year. The talks have stalled for six months and Greece needs a spring installment to meet a May bond payment.

The big hang-up is the size of a primary surplus which the government says is as much as 1.5 billion euros ($2.07 billion) and a trigger to ask for debt relief from the $325 billion owed in two bailouts.

The auditors’ questioning of the surplus figure means the European Commission’s statistics service, Eurostat, will decide whether certain revenues used by Greek officials in their calculations should count toward it or be shifted to the 2014 budget as the government tries to delay adverse effects ahead of May municipal and European Parliament elections.

Talks also focused on key reforms that auditors are pressing for – the implementation of market-liberalizing measures set out in a report by the Organization for Economic Cooperation and Development (OECD), an overhaul of the civil service and the reduction of employers’ social security contributions among other reforms.

Prime Minister Antonis Samaras has stressed that the OECD’s recommendations, dubbed “the toolkit” by the Troika, is “not gospel,” and that they don’t have to followed religiously. Some 153 reforms remain undone.

Some of the Troika’s proposals, including the extension of the shelf-life of fresh milk and giving supermarkets the right to sell over-the-counter medicines, are expected to be challenged as Samaras, buoyed by the primary surplus, has been digging in his heels after relenting to the lenders since he took office in June, 2012. He embraced austerity after previously opposing it.