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Eurozone suspends Greek debt relief plan

A Greek pensioner at a protest against pension cuts in Athens last month

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

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

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

It 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.
Analysis: Andrew Walker, BBC economics correspondent

This is a familiar refrain in the long-running story of the Greek bailout.

The lenders are once again concerned about the Greek government straying from the agreed programme.

Over and over again, missed objectives and slipping timetables have led to loan payments being delayed.

This time it is debt relief agreed by eurozone ministers rather than a loan payment that is being held up.

The particular issue is whether the measures on pensions and VAT will lead to Greece missing its targets for the government finances.

But there is another dispute in the background.

The International Monetary Fund thinks those targets aren't really desirable and are certainly unrealistic without further economic reforms.
Source: BBC