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The creditors arrive for new round of negotiations with the Greek government

30 January 2016 / 22:01:29  GRReporter
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Monday sees the start of the new Calvary for the government: to successfully complete the first bailout review. The institutions' CEOs will arrive today in Athens to start a new set of meetings with government representatives next week. They are planning to leave by the weekend, which shows that the review will be late to finish, as was the forecast of Pierre Moscovici.

Reports say the assessment exercise will be divided into at least two phases. The managers of the lending institutions will discuss the agenda with the government, including the pension overhaul, the financial measures, privatization, overdue loans, the reforms in the energy sector, etc. Thereupon, they will leave the scene and only return when the government is ready to complete the review. This is the model, which has been adhered to in the past.

The arrival of the creditors was actually met with relief, because its implication is that there will be no further delays in the negotiations. However, even today no one in Athens knows exactly what the proposals of the institutions are going to be. And this is so because there are splits inside the troika, with the IMF consistently maintaining a tougher line vis-a-vis the Greek government.

The hot potatoes are:

1. The pension reform: A big battle is looming over its measurable elements, mostly concerning the achievement of financial indicators of the rescue programme. The review is going to run on two levels: technical and central, with employment minister Georgios Katroungalos also being involved in the latter.

According to unconfirmed reports, there is little room for complacency as the creditors – and mostly the IMF – want to see a pension reduction of up to 15%. Negotiations will be tough, as the government insists on sticking to the 'red lines' and avoiding cutting the already dished out pensions. A battle is also expected on the subject of raising social insurance contributions. If the creditors fail to accept the increase proposed by the government, supplementary pensions might come under fire. As a last resort designed to avoid risking the successful completion of the review, the government might succumb to cuts in some very high primary pensions. The subject of pension ceiling is considered somewhat easier.

2. The new financial measures: The institutions are expected to come up with an assessment of the new 2015 revenue values. Athens insists that a primary budget surplus of 0.4% of GDP has been achieved in 2015, and that there will be a no financial deficit in 2016. The government expects to see the institutions' opinions, mainly that of the IMF, on this year's deficit. There will be disputes on the financial measures for 2017-2018, which must be equivalent to at least 1% of GDP.

The crisis has had dramatic consequences on full-time employees. Layoffs, wage cuts, the appointment of "cheaper" workers, working hour reductions – all this has led to losses of €26 billion for IKA-insured workers, in the period 2009-2014. Accordingly, the social insurance fund has lost €13 billion of contributions.

Up until 2012, the number of insured employees has decreased by 19.5% (489,702 persons less). The entire period from 2009 to 2014 has seen the number of the insured going down by 11.54% (288,793 individuals). Ihis percentage is 70.90% in the construction industry. Annual employee income has shrunk by 31.53%, from €33.379 to €22.854 billion. This percentage is somewhat higher among young workers appointed as replacements for more experienced ones – up to 32.50%. At 52.84%, the average reduction is a lot higher among low earners while high earners only got 15.38% less. IKA's revenues from social security contributions have plummeted by 34.34% despite the increase in the number of employees since 2012.


Tags: creditors institutions negotiations pension reform financial measures
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