Greek policymakers axed plans to slash state pensions scheduled to occur on January 1 as the left-led governing coalition looks to gain support ahead of 2019’s general election.
The plan, nixed on Tuesday, would lead to an estimated cut of about 1% in Greece’s annual GDP.
The European Commission agreed with parliament’s move, as the original plan would have cut at least 14% of the monthly retirement benefits of 1.4 million people, or 53.8% of all Greek pensioners, according to the commission’s estimates.
The latest (and presumably final) bailout, worth up to €86 billion ($97.8 billion), expired in August without help from the International Monetary Fund. Greece said it would keep demanding fiscal prudence, so lenders would relax their repayment terms on current loans.
Lenders also agreed that pension cuts were not needed for a balanced budget.
“The time has come for people to be rewarded for their sacrifices,” Prime Minister Alexis Tsipras, whose term ends next year, told lawmakers prior to the vote. Tsipras said the clawback was a “necessary breath for the people of labor … who saw their pensions and their dignity hurt,” Reuters reports.
Greece has received three international bailouts worth nearly €290 billion since 2010 to prop up its tanking economy. To make sure the nation can hit its post-bailout targets looking to keep future high-budget surpluses, the IMF and its eurozone partners are keeping a close eye on the country.