Fiscal alternatives of 500 mln sought to plug pay ruling hole

The Finance Ministryis seeking permanent measures to the tune of 500 million euros ahead of a formal verdict from the Council of State on the wage cuts imposed on members of the armed forces and emergency services. The country’s highest administrative court has reportedly deemed the wage cuts unconstitutional.

Even though the decision will not be formally issued for at least a few weeks, the country’s creditors have already sent an e-mail to the ministry asking for details on the issue and on the government’s intentions regarding the shortfall that any compensation will create.

For now the ministry has not said anything formally about how that possible gap in the streamlining program could be covered, citing the lack of a formal verdict. However there is very little room for maneuver and the amount of 500 million euros could come from the imposition of a new tax or a cut to salaries or pensions, while a senior ministry official said the impact of the verdict may in fact exceed 500 million euros.

That only concerns the armed forces and emergency services,

seeking measures worth 500 million euros ahead of the Council of State’s verdict that is set to deem unconstitutional the wage cuts imposed on members of the armed forces and emergency services. with the ministry calculating that another 200 million will be needed to cover the cuts suffered by judges, which were introduced with the same law. Officials are now taking it for granted that if other special wage categories resort to justice over cuts stemming from the same law, they may well secure a verdict in their favor too, which could increase the fiscal shortfall to over 1 billion euros.

In any case, the issue constitutes yet another sticking point in the government’s talks with its international creditors, with the latter having already estimated 2014’s fiscal gap at 1-1.5 billion euros while the Greek side is proposing measures totaling 1.2 billion to cover the shortfall.

The Finance Ministry’s aim is to plug that hole without imposing any harsh measures in the form of salary or pension cuts or new taxes, but that will most likely fail if the need to cover the wage cuts annulled by the Council of State is added to the fiscal gap, even if the decision’s impact is no more than 500 million euros. That in turn is certain to have a political impact that the government will have to face at a time when its parliamentary majority has been significantly reduced.