Germany and the IMF appear to be unhappy with the Greek government’s pension reform plan, but details are still fuzzy.
Greek Prime Minister Alexis Tsipras had been asked by Greece’s international creditors at the height of the crisis last summer to present a proposal on pension reform and raising taxes that they can accept, or Greece will be on its own.
Since then, the SYRIZA-led government has done all that it can to accommodate creditors’ demands, a move that was crucial in ensuring the signing of a new bailout agreement that provides 86 billion euros in funds for Greece’s financing needs over the next three years.
For starters, Tsipras abandoned all talk of ending austerity and committed himself to pushing forward deep structural reforms across the economy and the public sector. He severed links with hardcore leftists in his party and made vows to keep Greece in the euro. He also raised new taxes and promised to go after even tax debtors, i.e., taxpayers who owe as little as one thousand euros to the tax authorities and have monthly incomes of one thousand euros.
In addition, the SYRIZA-led government has lifted its objections to privatization and has made headway on selling whatever state-owned assets remain. Greece’s regional airports have been leashed to German corporate interests, the Port of Piraeus is about to pass completely into private hands, and the government has promised to sell 49% of the country’s power grid operator.
In December 2015, Tsipras and his SYRIZA-led government made yet another significant U-turn by passing a bill that allows Greek banks to find third-party buyers for debts that aren’t being repaid. In other words, gone was SYRIZA’s long standing opposition to allowing “vulture funds” buy debts at a discount to their face value.
In sum, the SYRIZA-led government hasn’t only fully capitulated to Germany’s demands, but is proving to be a more faithful servant to Greece’s creditors than the preceding Greek governments.
But pension reform is a hard nut to crack as Greece has a dependency on pensioners. This is an issue that can truly unite all Greeks against Tsipras and his government if the measures implemented on pension reform appear too harsh. In fact, the proposed government plan for pension reform, which reduces pension benefits substantially and raises the retirement limit, integrates pension funds, and eliminates early retirement, has already encountered significant opposition from all parts of the Greek population.
Even so, the euro-masters and the IMF want more blood. They argue that Greece spends more on pensions that any other European country (no country in the EU spends as much as Greece’s 17% of GDP on pensions, according to Eurostat) and demand more cuts.
Among the many problems facing the Greek pension system, which provides additional ammunition for the IMF and Germany to insist that the Greek government adopts tougher measures, is the size of the deficit in the pension system. It is over 9% of GDP compared to 3% of GDP in Germany.
Whether the Greek government will give in or not to what it considers to be “unfair and unreasonable demands” over pension reform is hard to say, but it is also difficult to see what other options it has at this stage in the game. It has capitulated on every other issue and has no alternative strategy for dealing with the crisis. Therefore, ss painful as it may be to admit this, Greece’s future looks extremely grim and SYRIZA’s days are probably numbered.
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