Pension rates in crisis-battered Greece are set for another round of reductions in 2019, a downward trend that commenced with the advent of the economic crisis in 2010 and the subsequent implementation of bailout-mandated reforms.
The latest draft agreement between Athens and institutional creditors is forecast to lead to a weighted average decrease of up to 22 percent for currently allocated monthly pensions. As previously and repeatedly reported, the reduction in social security spending will equal one percent of GDP in 2019, which is expected to total 1.8 billion euros in absolute terms.
According to analysts and actuaries familiar with Greece’s social security system, the cuts will affect roughly 30 percent of the currently allocated pensions in the country, or in other words, 850,000 beneficiaries belonging to all types of funds, sans the farmers’ fund (OGA). At last word, some 232,000 disability pensions will be excluded.
One of the “tools” expected to be used to slash social security spending is a so-called harmonization (downwards) of “personal differences” among pension rates, i.e. the difference between the monthly payment that was derived under the previous method of calculation, which was in effect until May 12, 2016, and the subsequent method of calculation, which emerged from a memorandum-mandated law passed by the Tsipras government in 2016.
The latest round of social security spending cuts in the country was more-or-less finalized between the Greek side and creditors’ top negotiators ahead of Friday’s Eurogroup meeting in Malta.
The challenge now facing the embattled government is to meet the roughly 1.8-billion-euro target for social security cuts, and if auxiliary (supplemental) pensions will be cut in order to meet the goal.