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Greece Rejects Creditors’ Call for Pension Cuts

Alexis Tsipras proposes to raise pension contributions rather than cut benefits.

Pensions are at the center of Greece’s latest dispute with its creditors.

The Greek Kathimerini newspaper reports that the International Monetary Fund’s managing director, Christine Lagarde, stressed to Prime Minister Alexis Tsipras during a recent meeting at the World Economic Forum in Davos, Switzerland that his government’s proposal for pension reform was inadequate.

The IMF jointly administers Greece’s €86 billion bailout with the European Union.

But Tsipras has said Greece won’t succumb to “unreasonable and unfair demands” and reportedly told Lagarde “there is no way” he can cut pensions for current retirees.

“One pension is a whole household’s income in the present circumstances,” the far-left leader told parliament last month.

Plans

The creditors have proposed merging Greece’s various pension funds into one and making cutbacks to cover a projected €1.8 billion deficit this year.

Tsipras’ government wants to raise employer insurance contributions instead by 1 percent and employee contributions by .5 percent.

Other European countries and the IMF are skeptical that this would be enough to plug the whole.

They also fear such increases would either discourage companies from hiring altogether or convince them to hire personnel without paying social contributions.

Tsipras has floated a new tax on bank transactions as another way to meet a €600 million deficit-reduction target.

Protests

Neither the creditors’ nor the government’s plan is popular.

Thousands of farmers have used tractors to block border crossings and roads in protest.

Sailors stopped work for two days in a similar demonstration, suspending ferry services to Greek islands.

Unions have called a general strike for Thursday.

Broken promise

Tsipras’ radical Syriza party won the election last year on a promise to reintroduce a thirteenth month of pension payments that had been cut at the creditors’ insistence by previous governments.

But when the country once again teetered on the brink of default, Tsipras gave in to demands from other European leaders and the IMF to continue austerity.

In the years leading up to the start of Greece’s debt crisis in 2010, government spending on pensions rose from 12 to 17 percent of economic output, reaching the highest rate in the eurozone.

Without reform, Greece would not comply with the terms of what is its third international bailout.