Greeks Push Through Pension Cuts, Eye Debt Relief

Greek leaders hope that the latest round of cutbacks will unlock talks in Brussels about debt relief.

Greek finance minister Euclid Tsakalotos speaks with European lawmakers in Brussels, March 2
Greek finance minister Euclid Tsakalotos speaks with European lawmakers in Brussels, March 2 (European Parliament)

Greek lawmakers pushed through €5.4 billion in savings early on Monday despite violent protests outside parliament and a three-day strike that has brought the Balkan economy to a standstill.

The cuts were required under Greece’s third and latest bailout from the rest of the European Union and the International Monetary Fund.

The country’s far-left leaders, having failed to find a way to honor their election pledge to cancel austerity, hope the latest cutbacks will at least unlock talks about debt relief.

Euclid Tsakalotos, the finance minister, warned that the alternative was “another Greek crisis” that could perhaps lead to “another failed state in the region.”

Creditors divided

The IMF has long advocated a reduction in Greece’s debts, which equal 180 percent of its yearly economic output.

But creditor states in Europe, led by Germany, worry that relief may discourage the Greeks from seeing through the reform program on which their bailout is conditioned.

Greece has received more than €250 billion in bailout funds in recent years, making its the largest financial rescue of any nation in history.

Pension cuts

Among the most controversial measures enacted on Monday were pension reforms.

Supplementary pensions and extra benefits for low-income seniors are phased out while a new law folds various retirement schemes into one monthly stipend of €384.

The cuts look sensible from a macro perspective. Public spending on pensions rose from 12 to 17 percent of economic output in the years leading up to the crisis, reaching the highest ratio in the eurozone.

But now that one in four Greeks is out of work, whole households depend on pensions for their income. The cuts could reverberate across the economy.

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