Beautiful promises burn beautifully. Before the rooster crowed, as the biblical passage says, along came an encyclical from Alternate Finance Minister Yorgos Houliarakis to belie governmental promises that pensions will not be cut.
As one might reasonably have expected, the instructions of the alternate minister could not ignore the commitments that the country has undertaken and passed into law.
The government already had been forced to retract a promise to maintain a VAT tax discount for five islands burdened by the migration crisis, which would have cost 28mn euros. Hence, one can imagine what would have happened if it abolished a law on pension cuts that are worth 3.2bn euros.
Obviously, the pre-electoral motivations of the government are of no interest to creditors.
Greece’s creditors have made it perfectly clear that the abolition of measures is impermissible, and that it is necessary to continue with reforms.
It is also known that pension cuts are not considered a measure to raise revenues, but rather a structural reform
The fact that the so-called Katrougalos law (passed when he was labour minister) provided that pension cuts are much greater than pensioners can withstand, does not concern creditors, who insist that the insurance system has not transcended its chronic problems.
Even if they are disposed to discuss changes at some point, it is obvious that this cannot happen in a pre-electoral climate in order to facilitate governmental promises of handouts.
It is also clear that the encyclical on the budget obliterates the government’s narrative regarding a clean bailout exit and the supposed “return of the keys” of economic policy to Greek authorities.
The current and the next government will be obliged to seek the permission of creditors on any measure, of small or great cost.
Just yesterday, the IMF warned, regarding yet another government pre-electoral pledge, that of reviving collective bargaining contracts, that there should be no significant changes to the current labour relations regime.
Let us not, therefore, cultivate self deceptions regarding all that we will hear in the coming period.
Costless pledges of handouts may serve partisan electoral motivations, yet they come up against the harsh reality that we shall continue to confront in the coming years.
