Euro Area Praises Greek Pension Proposal, Emphasizes Urgency

  • Dijsselbloem calls Tsipras's planned overhaul ‘serious’
  • Questions persist about viability of new pension system

Greece won praise from euro-area partners for a plan to revamp its pension system as the region’s rescue fund emphasized that a review of the country’s bailout be completed soon to unlock more international aid.

“It’s a serious proposal,” Dutch Finance Minister Jeroen Dijsselbloem, who chairs the group of his euro-area counterparts, said on Thursday in Brussels before their first meeting of the year. “It’s obvious that they’ve really done some serious work on that. The key question has yet to be answered: whether, in terms of the financial sustainability of the new system, it all adds up.”

Greek Prime Minister Alexis Tsipras is seeking to get a grip on pension outlays that soared to 17 percent of Greece’s gross domestic product last year from almost 13 percent in 2009. Part of his proposal would boost employer contributions -- a potentially contentious point with creditors keen on spending cuts that Tsipras says would make poor people worse off.

Creditors will assess the pension proposal as part of a first review of Greece’s fiscal and economic progress under an 86 billion-euro ($94 billion) international rescue agreed in mid-2015 -- the country’s third bailout since 2010. Tsipras wants to complete the review quickly because doing so would unlock more aid payouts -- the country received its most recent disbursement in December -- and pave the way for talks on easing Greece’s debt burden, which the European Union projects will soar to 200 percent of GDP this year.

Debt Review

Klaus Regling, head of European Stability Mechanism, told reporters after the meeting that the Greek government faces some urgency in completing the review “to improve confidence but also because the liquidity situation will become tight again over the next few months.”

Greece has debt-service obligations of about 4 billion euros in the first quarter of the year, Regling said, adding that the nation is running a small primary deficit.

Some ministers were sanguine that Greece had enough time to complete the review.

“According to my experience so far, this can still take a bit of time, but the situation is such that Greece has no immediate financial needs,” German Finance Minister Wolfgang Schaeuble said on his way into the meeting. “But we have every interest to support Greece.”

Dijsselbloem said completing the review will probably take months rather than weeks while stressing the resulting reward for Greece.

“Once the institutions and the Greeks have come to an agreement on the first review, then we will start political debates on debt sustainability,” Dijsselbloem said. “We promised to do that, we need to do that.”

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