The Greek Government has announced a freeze on all public and private sector pensions, and the cancellation of the announced increases set out in the budget, in a move that is hoped will stabilise the economy.

As part of a package designed to safeguard targets in the Stability and Growth Programme against macroeconomic and financial risks, reductions in public sector pensions and nominal wages aim to carry a fiscal impact of 0.7 per cent of GDP, or €1.7bn. A 60 per cent reduction of the 14th salary, which sees Greek workers receive their annual salary in around 14 instalments; a two per cent reduction in wage supplements, in addition to the ten per cent already announced; and a seven per cent reduction in wages and 60 per cent reduction of the 14th salary in public sector companies will also form part of the package.

Additionally, a reduction in the pensions of the Public Power Corporation and Hellenic Organization of Telecommunications (OTE) pension funds, which will lead to a reduction in the relevant budget allocation, have been announced.

The package the Greek Government has put forward includes permanent measures on the revenue and expenditure sides of the budget, together contributing two per cent of GDP, or €4.8bn. The measures will work alongside measures announced in the Stability Programme totalling four per cent of GDP, and those recently announced by the Prime Minister totalling 0.5 per cent. These, the Greek Government said, highlight their determination to ensure a sustainable fiscal path and to restore confidence in the Greek economy.

This bill has already been tabled to the Greek Parliament in line with the emergency procedure forecast in the Greek Constitution, and a new bill on the reform of the tax system, the implementation of tax collection mechanisms and the fight against tax evasion is due to follow.

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