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Poverty looms if pensions are trimmed

After six years of recession, Greece is offering nearly 8 billion euros ($9 billion) worth of new savings.

Looking tired and leaning on his cane, Fotis Theodorakopoulos watched quietly as other demonstrators gathered to discuss Greece’s financial drama and chant defiant slogans outside the parliament.

Although he stayed on the sidelines, the 69-year-old said he was fully aware that Europe was about to decide on his future.

The region’s leaders this week are examining new Greek economic reforms demanded in exchange for loans that could determine the country’s survival in the euro bloc — and its financial prospects for years.

After six years of recession, Greece is offering nearly 8 billion euros ($9 billion) worth of new savings. But they will come mainly from raising taxes on businesses, households and the purchase of goods in an effort to spare pensions, which creditors had wanted trimmed.

The pensions are based on a state-funded system and have become a flashpoint in the talks on how to heal Greece’s public finances. They are hugely expensive for the government, but have already endured big cuts and a large and growing number of Greek families depend upon them as an informal safety net against poverty.

By one government estimate, pensioners’ income has been cut by an average of 40 percent since the financial crisis began in 2009.

“We don’t want to them to sign another bailout agreement. If they cut pensions any further it will finish us,” said Theodorakopoulos, a retired security guard.

He receives a 1,000 Euro ($1,135) monthly pension which he uses to look after his disabled daughter.

“It’s just me and my daughter. She gets a small state allowance, so we have to help each other,” he said.

Greece’s creditors — which comprise fellow eurozone states and the International Monetary Fund — had wanted the government to slash funding to the pensions system by at least 1.8 billion euros ($2 billion) in exchange for more bailout loans. The country needs the loans urgently as it faces a debt repayment on June 30 that it cannot otherwise afford.

Lenders are currently reviewing its latest offer of reforms and some officials say a deal is possible this week.

The Greek government offered some measures to make the pension system more financially stable, but spared any cuts to pensioners’ income.

Instead, it suggests increasing the contributions that employers pay for pensions and phasing out early retirement rights.

Reform of the system has been complicated by a Greek high court decision this month declaring many earlier cuts to pensions illegal.

Alexis Tsipras, Greece’s left-wing prime minister, wrote in a newspaper article in Germany, the country’s biggest European creditor and among the region’s wealthiest economies, to explain why further cuts would have “dramatic social consequences.”

“The pensions of the elderly are often the last refuge for entire families that have only one or no member working in a country with 25 per cent unemployment in the general population, and 50 percent among young people,” Tsipras wrote in the daily Tagesspiegel —  Associated Press