Aug. 31 (Bloomberg) -- Greek Finance Minister Yannis Stournaras has drafted an 11.7 billion-euro ($14.7 billion) package of spending cuts that will mean about a third of savings will come from reduced spending on pensions.
The two-year package, which is still being discussed by the coalition parties that support the government of Prime Minister Antonis Samaras, provides for 3.5 billion euros in savings from reduced pensions, lower lump-sum payments and an increase in the number of days worked required to qualify for the minimum pension, according to one document distributed to reporters in Athens by one of the parties.
An overhaul of the public sector, including wage cuts for lawmakers and ministry officials, will provide another 2 billion euros in savings in 2013 and 2014. Wages for police, firemen and other uniformed personnel are to be cut by as much as 12 percent and Christmas and holiday bonuses will be abolished as part of a 1.5 billion-euro savings drive.
Samaras is struggling to find common ground with his coalition partners on the cuts required by the so-called troika of the European Commission, the European Central Bank and the International Monetary Fund to qualify for international funds. Evangelos Venizelos of the socialist Pasok party and Fotis Kouvelis of Democratic Left said earlier this week the package needs to avoid the across-the-board cuts in wages and pensions that have pushed the country to a fifth year of recession.
The troika returns to Athens next week to continue its review of Greece’s progress in meeting the terms of its 240 billion euros of bailout loans. Without a positive review, the other countries in the euro area may not approve the disbursements of funds, which could lead to Greece’s exit from Europe’s single currency.
Samaras said yesterday the country needs to prove it’s serious about meeting promises made to international creditors. The new package contains “painful, necessary spending cuts” and will be the last of its kind because Greek society can no longer take such austerity measures, he said.
Another 1.3 billion euros will be saved in cutting benefit payments, including “rationalization” of family payments, “adjustments” to disability benefits and a cap and means-testing for benefits paid to unmarried, dependent daughters, according to the document.
Stournaras is to meet with German Finance Minister Wolfgang Schaeuble in Berlin on Sept. 4 before European Union President Herman Van Rompuy visits Athens on Sept. 7 to meet with Samaras.
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