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Government to tender double budget, with and without pension cuts

In the end, calmer - and rather enlightened - voices within the government prevailed, as it seems thatat the last moment 'the view prevailed that in the present phase a conflict with the Europeans on pensions would be pointless since it would amount to a crash against a wall.

In essence, the government, at the expense of the Finance Minister, "gathered in" the information leaked on Friday and submitted a draft with a double scenario for pensions, on the one hand to reassure those abroad concerned that it is preparing to do what it wants and on the other hand not to cancel the narrative within the country that it is not going to reduce the pensions on New Year's Eve. Moreover, no one was willing to undertake responsibility for engaging Greece even further in the Italian crisis, which raised the first waves in the markets on Friday.

The first scenario will include savings of around 2.1 billion euros (net) from the abolition of the personal spread, and about 1.9 billion euros to cover the counter-measures, ie those voted in 2017 and were included in the Medium-term plan. What will change is the provision for the surplus, which will be higher than the 3.96% predicted by the Medium term plan, as the Finance Ministry estimates it can reach 4.2% or even exceed it. In this way, the Greek side wants to show that even if the cuts in pensions are canceled (and countermeasures are gone), the 3.5% target is not jeopardized.

The second scenario is in line with the above estimate of oversurplus. Thus, pension cuts will disappear as well as a large volume of countermeasures, but TIF announcements will be incorporated, which in Athens "fit" into the Budget of 2019, without creating a fiscal "vacuum" since the their cost is not expected to exceed 700 million.

The problems are basically two. The first one has to do with the communications handling of the subject, which appears to herald a storm. At first, the baseline scenario was that the draft would be tabled with the cuts. This scenario was reinforced by the fact that although it was Athens' desire to clarify the issue straight away, the Europeans made it clear that the debate will not end before the December Eurogroup.

Last week, as soon as the countdown for the draft began, strange information emerged that a legal formula for a short-term postponement of the bill was sought despite a clear constitutional provision against this. There was also the view that it was not possible for the draft to have cuts and then to withdraw it, because there would be a problem both within the country as well as with the Europeans.

On Friday, from New York - and while the corresponding information from the PM's office was being leaked - a senior government official "showed" that the draft would not incorporate pension cuts. Eventually we have reached the last minute of the draft, so the government spokesman speaking to 9.84FM said that the Plan would incorporate both scenarios. It should be noted that all these days, at the European level there was not the slightest awareness of what the Greek side was going to do, and at least until Friday they had the certainty that the draft would normally incorporate pension cuts.

The second problem is the most salient, through which Euclid Tsakalotos will however gain time. It concerns the differences, divergences in the calculations between the country's accounting office and European technocrats, about the  2019 surplus. These differences were recorded starting in the summer even with the assumption of pension cuts. While the Greek side had estimated a primary surplus of 7.5 billion euros, the Europeans cut it to 7.2 billion euros, shrinking the budget by about 550 million euros, as the commitment is for a surplus of 6.64 billion euros.