IMF: Pension cuts necessary for relief measures

The International Monetary Fund has underlined the need for planned pension cuts to be carried out while conceding that the negotiation is between Greece and its European partners as the Fund did not participate in the country’s last bailout program.

In a briefing to reporters in Washington, IMF spokesman Gerry Rice said that a planned round of further cuts to pensions, which are scheduled to come into effect on January 1 but which the government insists can be avoided, were agreed a long time ago, as was the the reduction of the tax-free threshold for incomes, due to be enforced in 2020.

Proceeding with the agreed measures would free the fiscal space for Greek authorities to be able to offer tax relief and social welfare measures, Rice said. However, he stressed that the issue was one for Greek and European officials to settle. “The Fund no longer has a financial arrangement or program with Greece so clearly the main interaction now is between EU partners and Greece,” Rice said.

Facing elections, Greek officials have insisted that there is no need for cuts to pensions for Greece to achieve its primary surplus target. A decision on the cuts is to be taken at a Eurogroup summit in mid-November. European officials believe Greece will post a primary surplus of 3.2 percent of GDP next year compared to a Greek forecast of 3.6 percent (just over the target of 3.5 percent). European Stability Mechanism chief Klaus Regling has said Greece will have some “fiscal space” but not enough to avoid pension cuts.

Rice also referred to the possible buyback of Greece’s IMF loan as “one of many options” available to Greece as debt management measures, noting that the country has the benefit of time given the recent debt-lightening measures and its cash buffer.