Eurozone suspends Greek debt-relief plan

A Greek pensioner leans on a shepherd's crook during a demonstration against planned pension cuts in Athens, Greece, 3 November 2016Image copyright

Image caption

A Greek pensioner leans on a shepherd’s crook during a demonstration against pension cuts in Athens, 3 November 2016

Eurozone lenders to Greece have suspended their recently agreed debt-relief plan for Greece.

The lenders are unhappy that the Greek government is planning to spend €617m (£517m) on giving poor state pensioners a pre-Christmas bonus.

The European Stability Mechanism (ESM), the body that helps eurozone governments in trouble, said it had not been asked to agree the bonus.

The ESM said it would now scrutinise the proposed payment to the pensioners.

“Following recent proposals by the Greek government to spend additional fiscal resources for pensions and VAT, our governing bodies have put their decisions temporarily on hold,” a spokesman for the ESM said.

“Institutions are currently assessing the impact of Greek government decisions vis-a-vis the ESM programme commitments and targets.

“[We] will then analyse the institutions’ assessment and subsequently decide how to proceed,” he said.

The debt-relief deal between Greece and the ESM was agreed on 5 December and would reduce the interest burden on the country’s debts.

The Greek government announced its bonus for poor pensioners – those earning below 800 euros a month – just three days later, but without consulting the eurozone representatives.

It also exempted residents of Aegean islands from VAT because of the influx of migrants.

A spokesman for Jeroen Dijsselbloem, the head of the Eurogroup – the eurozone finance ministers who have been negotiating with the Greek government over its massive debts – said the Greek government’s action appeared “to not be in line with our agreements”.

There was “no unanimity now for implementing short-term debt measures,” the spokesman added.