Greece’s leftist-led government offered a reform plan for the country’s pension system that would cut future benefits, with no backing from the political opposition, before talks with official lenders resume later this month.
Reforming the country’s ailing pension system, which Prime Minister Alexis Tsipras has said is on the verge of collapse, is a prerequisite for the first review of Greece’s €86 billion bailout agreed to in July last year.
The tough pension reforms will be a test for Tsipras’ ruling coalition, which has a majority of just three seats in parliament, and his resolve to carry out measures demanded by international creditors, who must sign off on the plan.
The proposed overhaul of the pension system, which has been a drag on the budget for years, sets a ceiling of €2,300 on the maximum monthly pension outlay and an upper limit of €3,000 for those getting more than one pension.
The plan calls for merging all six main pension funds into one and foresees cuts in future main pensions that could reach up to 30 percent. It sets a lower limit at €384 per month.
The plan includes higher social security contributions for employers and employees, by one percentage point for those paid by employers, and by 0.5 percentage point for employees.
“The government is trying to avert the collapse of the social security system … the opposition parties must lend support in this national goal,” said government spokeswoman Olga Gerovassili. She blamed previous governments for drastic cuts in benefits during the debt crisis.
“The average (monthly) pension was 1,480 euros in 2010 but ended up at €863 when the (conservative) New Democracy and (socialist) PASOK handed over the government,” she said.
All parties in the political opposition object to the benefit cuts in the plan, which has been handed over to the country’s lenders.
The overhaul, which must deliver savings worth 1 percent of gross domestic product, or €1.8 billion, next year, is the most sensitive of a raft of reforms demanded by the eurozone and the International Monetary Fund in exchange for aid.
“We disagree with raising social security contributions,” former conservative Labour Minister Yannis Vroutsis told Skai TV. “This would reduce growth and raise unemployment.”
The government aims to submit the legislation to parliament by mid-January and have it voted into law by early February, a government official told Reuters, declining to be named.
Official lenders have warned that raising social security contributions may deter job creation and set back economic recovery, meaning negotiations before the final version of the sweeping reform gets to parliament will be tough.