Welfare to be slashed by 900 mln euros per year in benefits reform

Sweeping reformsto Greece’s welfare system are planned to come into force in 2016 at the latest, including the universal application of the Guaranteed Minimum Income scheme, as part of the country’s third bailout plan. The third memorandum, in which support for the most vulnerable social groups is a priority for the government, requires welfare cuts of 0.5 percent of gross domestic product each year as part of wide-ranging reforms.

The new memorandum foresees a complete evaluation of the benefits currently provided both in cash (through the pilot implementation of the Guaranteed Minimum Income scheme in 13 municipalities of the country) and in kind (through solidarity cards or the European Social Fund’s poverty program). The World Bank has participated significantly in the assessment, accelerating its pace to ensure that work is completed by this October, as requested by the institutions. The World Bank has requested an extension until the end of year.

An annual cost reduction of approximately 900 million euros forms part of the memorandum, as well as the fiscally neutral implementation and expansion of the Guaranteed Mini- mum Income scheme to a national level. The schedule states that by September 2015 there will be preparations for the implementation of a mixed system of welfare measures, while by November 2015 the final decisions will be taken in the context of wider reforms to the welfare system in Greece.

In order to monitor both the Guaranteed Minimum Income and other benefits, the government is committed to creating a specific control framework by September 2016, which will allow the real-time clarification of whether beneficiaries contin- ue to meet the required criteria.

The measures leave open the possibility of the Guaranteed Minimum Income scheme being connected with integration measures in the labor market. One objective is the creation of 50,000 new job positions, mainly for the long-term unemployed and those under 25.

The measures to support the employment of 150,000 people, including vulnerable groups and beneficiaries of Guaranteed Minimum Income, must be finalized in collaboration with the European Union by March 2016.

The government will have to reduce welfare spending by 0.5 percent a year as part of its new agreement with Greece’s creditors following a comprehensive review of the benefits system.