Regling: Final decision on pension cuts annulment depends on review of primary surplus data

European Stability Mechanism (ESM) chief Klaus Regling has put a damper on the government’s intention of completely canceling legislated pension cuts in the long term.

“Although Greece has the fiscal space this year, it is not sufficiently large to completely cancel pension cuts that have been agreed upon,” he said.

Noting that a final decision has not been made on the issue, Regling underlined that the existing fiscal space is extremely positive.

“The outperformance of the Greek economy beyond fiscal targets is not sufficient to automatically justify the cancellation of the measure. We shall see and discuss the issue,” said the ESM chief.

“The good news is that the Greek economy has achieved a higher primary surplus than the required 3.5 percent. That is positive. That surplus can be used for other purposes. The amount, however, is not enough to automatically justify the abolition of the pension cuts measure. That is why we are observing, discussing, and examining [the issue,” he underlined.

The Greek government, with a view to elections is expecting the green light to cancel the pension cuts measure at the 5 November Eurogroup meeting, in order to proceed with the final draft of the 2019 budget, which will be tabled in parliament on 21 November.

Nonetheless, the likeliest scenario is that the final decision on pensions will be made at the 3 December Eurogroup. One cannot rule out the prospect that countries which harbour reservations – the Germans first of all – will insist on implementation of pension cuts simply because they have already been decided.

Before any decision, technocrats will scrutinise the fiscal data in the 2018 and 2019 state budgets, in order to ascertain the precise amount of the primary surplus, and that portion of the surplus that exceeds the 3.5 percent agreed target.