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'Greek cuts unconstitutional'

Friday, November 02, 2012    

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ATHENS, Greece — CUTS in pensions and salaries for state employees that the Greek government has planned to unlock critical bailout funds were ruled unconstitutional by a court yesterday, the semi-official ANA news agency reported.

The Court of Auditors unanimously ruled that the reduction in pension benefits, the fifth in the past few years, as well as the elimination of annual bonuses for state employees, were against the provisions of the Greek constitution.

The government has circumvented the court's previous decisions that earlier wage and benefit cuts were unconstitutional, and Finance Minister Yannis Stournaras said after the ruling: "I'm not particularly concerned, I believe the measures will be applied."

Under pressure from the EU and IMF, the Greek government pushed through beginning in 2013 an increase in the retirement age from 65 to 67, and a progressive reduction of five to 15 per cent in pensions above ¤1,000 ($117,000).

The government is planning ¤9.4 billion in cuts which will affect mainly state wages, pensions and benefits that have already been drastically reduced over the past two years.

The cuts are part of an austerity programme worth ¤13.5 billion overall, which it hopes will be enough to unlock ¤31.2 billion euros in rescue funding.

Greek Prime Minister Antonis Samaras has said the coffers in Athens will run dry on November 16 — when a three-month treasury bill worth ¤5 billion must be repaid — unless it receives the funds from its latest bailout package.

Greece's negotiations with international lenders for desperately needed rescue funds some two weeks before bankruptcy looms are stuck, the IMF said yesterday, sending Greek stocks plunging.

The International Monetary Fund said the talks were stalled over the conditions for financing Greece as it seeks a two-year extension to meet fiscal goals.

While Athens has made "good progress" on fiscal and structural reforms, IMF spokesman Gerry Rice said in Washington, "an understanding must also be reached between Greece and its creditors on financing terms consistent with debt sustainability".

That news triggered a five per cent drop in Athens' main ATHEX stock index, which tumbled below the 800 point level to close at 761.24 points.

Shares in banks, which are awaiting some of the rescue money to shore up their capital, were the worst hit, with the banking stocks sub-index down by 11.7 per cent.

Greece, the IMF, the European Union, and the European Central Bank, known as the troika, have been locked in discussions for weeks on revising terms for the country's bailout after it fell short of targets which needed to be met for the release of the next instalment of funds from the three lenders.

Athens has asked for the fiscal targets to be pushed back another two years, to give it more room to rekindle economic growth after a crushing austerity programme sent it into a deeper recession than the lenders had expected.

Samaras had announced on Tuesday that his government had agreed with the mission of troika auditors in Greece on the terms of a new (euro0 13.5 billion austerity package needed to unlock the next instalment of rescue loans.

Accordingly, the finance ministry on Wednesday introduced a budget and a three-year economic programme pledging the required level of cuts in 2013-14.

But on the same day the European Commission warned that a debt deal with Athens was still pending. Eurozone finance ministers are due to make a final decision on the payout by November 12.

Finance Minister Wolfgang Schaeuble of Germany, Europe's paymaster, noted that considerable progress had been made in the talks with Greece "but there is still a lot of work to do".

—AFP

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