Eurozone partners praise Greek progress, doubt pension funding

By Paul Taylor BRUSSELS (Reuters) - Euro zone partners are impressed with Greece's progress in implementing its latest bailout but have misgivings about its proposal to partly fund a major pension reform by raising contributions, EU officials said on Wednesday. Greek Finance Minister Euclid Tsakalotos has been touring euro zone capitals to explain his country's reform measures and seek support for an early, positive review by international lenders, which would trigger talks on debt relief for Athens. His six-stop tour culminated in Berlin on Wednesday, where he met hardline German Finance Minister Wolfgang Schaeuble, who proposed suspending Greece from the euro zone at the height of its debt crisis last July. "The meeting was constructive," a Greek government official said. "The conclusion is that progress is satisfactory, there is a common will to deal with problems that may arise in the coming period." A German Finance Ministry spokeswoman said: "It was a constructive, matter-of-fact atmosphere. They talked about the state of play of the Greek reform programme. Mr Schaeuble made it clear that Greece needs to implement what has been agreed. "Only then will there be a successful completion of the upcoming review. The minister also stressed the well known German position with regard to Greek demands for possible debt relief,” the spokesman said. Eurogroup finance ministers will get an update on Greece at their monthly meeting on Thursday and may set a date to start the bailout review next week, aiming to conclude in February, other EU sources said. Eurogroup Chairman Jeroen Dijsselbloem told reporters last week the review could last "rather months than weeks". A senior EU official said experts were still analysing the draft pension reform bill circulated by the Greek government last week. But there were concerns that raising contributions could weigh on growth and deter private sector job creation just when Athens is struggling to get out of another recession. The official said the International Monetary Fund, whose continued involvement in the programme Germany, the Netherlands and Finland insist is essential, was likely to be particularly resistant to any increase in pension contributions. Other tricky issues due to be completed as part of the first review are the setting up of a privatisation fund to pay down debt, and increasing taxation of farmers. They officially make up more than one-third of the population and enjoy tax breaks exploited by land-owners not engaged in full-time agriculture. The EU official said the proposed pension reform was ambitious in seeking to merge Greece's six main regimes into a single system and put it on a long-term sustainable footing. "It's less bad than we feared. We are certainly not outright against it," he told Reuters. "But the quantification is not there. We need more numbers. Where we and the IMF will have an issue is on financing by increasing taxation." The plan sets a lower limit of 384 euros per month for basic pensions and a ceiling of 2,300 euros for the maximum monthly pension outlay. Average monthly pensions now stand at 850 euros. The EU official said there were worries that a basic pension unrelated to lifetime contributions could reduce incentives to work in the official economy. The government's efforts to protect current pensioners at the expense of future retirees could create a long-term split to the benefit of "insiders". An official who attended one of Tsakalotos' meetings said he had argued strongly that a left-wing government had a duty to protect the poorest workers. "In general, we think they are more protecting the middle class than the lower class," the EU official said. (Additional reporting by Renee Maltezou in Athens and Noah Barkin in Berlin; Writing by Paul Taylor; Editing by Mark Heinrich)