May 10, 2017 / 4:55 PM / 2 months ago

Greek court warns state against planned pension cuts

2 Min Read

FILE PHOTO: Greek pensioners take part in a demonstration against planned pension cuts in Athens, Greece April 4, 2017.Alkis Konstantinidis

ATHENS (Reuters) - A Greek court says the government should not legislate new pension cuts for 2019 over the next few weeks, a measure Athens has agreed with its foreign creditors, because it may be against Greek and European Union law, court officials said on Wednesday.

While the Court of Audit has an advisory role only in this case, its warning spells potential legal challenges for the leftist-led government which struggled for months to wrap up talks with the EU/IMF lenders and is behind in opinion polls.

Greece must legislate the measure and other agreed reforms before euro zone finance ministers meet on May 22 to assess Greece's bailout progress.

It would not be the first time the courts have become involved in bailout. The Council of State, one of Greece's three top courts, has ruled that pension cuts imposed in 2012 were unconstitutional, forcing the state to compensate those affected.

The country's lenders have recently called on Greek authorities to seek legal advice on whether the agreed reforms are in line with Greek law and the constitution, according to a draft document seen by Reuters.

Greek government officials said the government would consider the court's advice and make amendments where possible. The bill is likely to be submitted to parliament next week, while the vote is expected by May 18.

Greece and its creditors -- the European Union and the International Monetary Fund -- reached a deal last week on a set of measures, including pension cuts, it must implement to qualify for more bailout aid which helps it stay afloat.

They agreed that Athens will reduce pension spending by 1 percent of gross domestic product in 2019, one year after its current bailout expires, and reduce the tax-free threshold to raise another 1 percent of GDP in 2020.

The court said that an actuarial study justifying the pension cuts - up to 18 percent - was also needed, the officials said.

Reporting by Constantinos Georgizas; Writing by Renee Maltezou Editing by Jeremy Gaunt

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