New Austerity Measures for Greece Include Pension Cuts, Lower Tax-Free Income

The Greek government on Tuesday agreed with international creditors on new austerity measures in order to close the second review of the bailout program, which also paves the way for talks on debt easing.

According to sources close to the 12-hour talks Greek pensioners will see their main and supplementary pensions slashed by up to 18 percent, with the finance ministry estimating an average of 9 percent cuts across the board. Based on the agreement, the main pensions will be re-calculated and, where there are personal differences, there will be cuts not exceeding 18 percent. A similar procedure will apply to supplementary pensions as well.

Regarding the tax-free income, the Greek side agreed to lowering the threshold to 5,681 euros for single individuals and go up to 6,700 depending on number of children, thus expanding the tax base.

In labor law reforms, the Greek side managed to reinstate a form of collective bargaining as of September 2018, when the third bailout program ends. On the issue of mass layoffs, there will be no changes in the percentages and no rollback will be introduced. However, the labor ministry pre-approval will be abolished and the layoff procedure will be reviewed by the Work Council.

In the energy market, the Greek side agreed to the privatization of 30-40 percent of lignite production units of the Public Power Corporation.

Regarding market regulations, retail stores in tourist areas and during tourist season will be opening on more Sundays than the seven Sundays in the year as it is now. Also, non-prescription medicine will be sold to other stores as well and not only in pharmacies.

Countermeasures

According to the same source close to the talks, Athens proposed the following countermeasures for 2019. The countermeasures will be implemented on the condition the government meets its fiscal targets.

Some of the countermeasures proposed are in the form of social benefits, such as rent subsidies for low income families, 260 million euros granted to married couples for the first and second child, more school meals, increase in number of childcare positions, reduction of participation in pharmaceutical expenditure with income criteria.

There are two countermeasures that would boost development. Specifically, 250 million euros will be allocated for new jobs and another 250 million for development measures though Public Investments Program.