The International Monetary Fund has opposed to an increase in civil servants’ pensions and salaries as the Greek government prepares to do both.
Kyriakos Mitsotakis’ has previously promised to raise pensions by about 5 per cent from next year, as required by law, and expand the abolition of the solidarity levy to retirees should Greece exit financial supervision. The IMF is also sceptical of plans to reduce social security contributions, something unions have requested especially following recent price hikes in rent, utility bills and essential goods following the pandemic and the Ukraine-Russia war.
“The impact of the plan for permanent reductions in social security contributions and the abolition of the solidarity levy must be carefully considered,” said the Greece: 2022 Article IV Consultation report, sent as part of the IMF’s mission.
The directive also added that the government must resist “pressure to increase the pensions and salaries of civil servants”.
Finance Minister Christos Staikouras expressed his certainty on Skai TV on Thursday (local time) that some additional fiscal space will be found later this year, as he estimated that the need for support against fuel hikes would continue.
He added that the abolition of the solidarity levy to the state on pensioners from January 2023 remains a government priority.
This is not the first time the IMF has challenged this government priority, as its view is that other goals are paramount in these difficult times.
“The recent increase in health spending and public investment must be sustained,” it noted.
Otherwise, the report is generally positive, noting the strong recovery and acknowledging that the government has continued its reforms despite the difficulties, while nonperforming loans have also declined. In addition, it highlights the repayment of the IMF loans in full, so the post-financing evaluation process has been completed, Kathimerini reported.
Growth is estimated at 3.5 per cent this year and 2.6 per cent in 2023, against the government’s forecast in the Stability Program of 3.1 per cent and 4.8 per cent, respectively, while inflation is projected to reach 6.1 per cent this year and 1.2 per cent in 2023 (compared to the government’s forecast of 5.6 per cent and 1.6 per cent respectively). The IMF adds that the debt is declining and that the risks are manageable in the medium term.