Ministers discuss new savings ahead of troika visit

The effort to find 11.5 billion euros in savings for the next two years began in earnest Thursday as Finance Minister Yannis Stournaras met with Cabinet colleagues to discuss where cuts could be made to satisfy the demands of Greece’s lenders.

Stournaras also informed fellow ministers that the government would not need to make further savings this year beyond the 3 billion euros that the administration led by Lucas Papademos had agreed to, as long as Greece can keep to the terms of the bailout.

With inspectors from the European Commission, the European Central Bank and the International Monetary Fund, collectively known as the troika, due back in Athens on July 24, Stournaras met with the ministers of defense, interior, administrative reform, development, education, culture, health, justice and labor to discuss where the government could find the 11.5 billion euros of savings for 2013 and 2014.

Sources said that about 7.5 billion euros would come from the state budget, while 3 billion would be from social transfers and 2 billion would be saved from changes to the structure of the central administration.

The biggest savings, more than 1 billion euros respectively, are due to come from costcutting at local authorities and central government spending. The latter will involve greater use of cheaper, generic drugs, so that by 2014 they make up 70 percent of all the medicines prescribed in Greece.

There are also plans to cut all pensions above 1,500 euros by 10 percent. This will save 600 million euros a year. Auxiliary pensions will also be limited so retirees can earn no more than 2,400 euros per month from the basic and supplementary packages they receive. This will save roughly 1 billion euros.

Stournaras is due to meet with the ministers again on Monday to discuss the cuts, before they are finalized on Wednesday.

The minister said that no new savings would be needed this year if the measures already agreed pay off. There is concern, though, that the special property tax, which is levied through electricity bills, might not raise the 2.5 billion euros planned. It is also doubtful if the government will be able to reduce spending on drugs by 1 billion euros this year.

The government is also preparing alternative measures to avoid cuts to civil servants, such as military personnel and police officers, who earn so-called “special salaries.” A planned 12 percent cut to their wages would save 205 million euros. The government believes that it can make these savings from other areas.

Stournaras told his colleagues that by sticking to this year’s budget and progressing with structural reforms, Greece would be in a better position to convince its lenders to extend its fiscal adjustment period by two years from 2014.

Sources said that the government would like to be in a position in September to announce the measures for 2013 and 2014 at the same time as the extension in the hope that it would be easier for voters to accept a fresh round of cuts. 

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