* Top court reverses wage cuts to policemen, army officers
* Ruling could increase spending by up to 500 million euros
* Budget hole may complicate bailout talks with lenders
By Lefteris Papadimas
ATHENS, Jan 22 A top Greek court has struck down
wage cuts imposed by the government in 2012 on police and armed
forces to comply with the terms of the country's EU/IMF bailout,
court and government officials said on Wednesday.
The ruling by the Council of State, Greece's highest
administrative court, could blow a hole of as much as 500
million euros ($677 million) in the country's finances, a senior
finance ministry official warned.
That would further complicate already stalled talks with
international lenders to release more rescue loans.
The court's ruling that a 10 percent wage cut for policemen
and soldiers applied in 2012 was unconstitutional has not been
made public but was confirmed by court and government officials
after it was leaked to local media. It said policemen and
soldiers had key duties and were entitled to better treatment
than other state workers whose salaries were cut.
"They are a core part of the state and therefore deserve
special protection," a senior court official told Reuters on
condition of anonymity, estimating it could force the state to
pay back a maximum of 100 million euros.
But a senior finance ministry official said the cost might
be much higher since the ruling will also likely increase
pension and promotion payments, which are calculated as a share
"The bill could run up to 500 million euros," the official
told Reuters on condition of anonymity, but added that a
concrete estimate was not possible until the ruling was
published in the coming months.
The back payments would cover the period since mid-2012 when
the cuts took effect until now.
Portugal's constitutional court has also rejected austerity
measures agreed by the government under its bailout, most
recently in December, forcing the government to find alternative
fiscal measures to reduce the country's budget deficit.
In separate decisions earlier this week, the Greek court
rejected appeals to overturn wage cuts filed by other civil
servants, including workers at the finance ministry, energy
regulator and securities market watchdog, court officials said.
Greece has yet to decide if payouts will be made as part of
its 2014 budget or stretched out over multiple years, the
finance ministry official said. The 2014 budget includes a 1.12
billion euro reserve for "unforeseen spending".
Public sector wage cuts account for about a tenth of
austerity measures Greece has taken since 2010 to fix its
finances under the terms of two bailouts totalling about 240
Greece's public sector wage bill more than doubled during
the country's debt-fuelled economic boom in 2001-2009, while it
rose by less than 50 percent in the euro area over the same
period. Civil servants earning more than 1,500 euros a month
have since seen their wages cut by between 20 and 35 percent.
Athens and its European Union and the International Monetary
Fund lenders are currently wrangling over 4.9 billion euros of
bailout loans due to be released last year but held up over
disagreements over size of a budget surplus and reforms.
Following three years of harsh austerity measures imposed by
the lenders, Greece is on the verge of declaring it has
eliminated its budget deficit, which peaked at 16 percent of GDP
in 2009, and has ruled out any further wage or pension cuts.
Under the terms of its bailout, Greece's primary surplus
must widen to 4.5 percent of GDP in 2016. Athens expects to
achieve that goal without more austerity, helped by economic
recovery and a crackdown on tax evasion.