Greece approves more austerity to unlock bailout funds

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19 May, 2017

Greece approves more austerity to unlock bailout funds

On Thursday, Greek lawmakers approved pension cuts and tax increases to unlock vital financial aid, as angry demonstrators rioted outside parliament over more austerity - the latest since the country plunged into crisis seven years ago.

The leftist government hopes that legislating the measures four days prior to the euro zone financial meeting in Brussels will convince its lenders to release a 7.5-billion-euro bailout fund and grant it even more debt relief.

It is now up to the lenders to make good their promises, Prime Minister Alexis Tsipras told journalists.
"We deserve and we expect from Monday's Eurogroup a decision regulating debt relief which will correspond to the sacrifices of the Greek people," he said, referring to a meeting of euro zone finance ministers on Monday.

Lenders have agreed in principle to debt reform but not on details. Just before midnight, when the measures were about to be approved, some demonstrators hurled petrol bombs and firecrackers at police guarding the legislature. They responded with tear gas.

Greece has seen its national output shrink by a quarter since it was first forced to seek external financial aid in return for spending cutbacks in 2010.

The increasingly unpopular government hopes to conclude its restructuring process and secure its debt relief, which will allow Greece to be included in the European Central Bank's asset-buying program and return to bond markets in the coming months. Athens requires financial aid to repay debt due in July.

It agreed to adopt more austerity, which will be implemented in 2019 and 2020, to convince the International Monetary Fund to participate financially in its latest 86-billion-euro bailout. To sweeten the sour pill, Tsipras has promised to mitigate austerity with tax relief also legislated on Thursday. It will be implemented only if Greece meets its fiscal targets. New austerity has drawn criticism from the opposition, which has accused Tsipras of costly foot-dragging.

"You've become the best advertisement for austerity in Europe," opposition Conservative leader Kyriakos Mitsotakis said, addressing Tsipras.

Greece has received about 260 billion euros in bailout aid since 2010 in exchange for reforms and deep spending cuts saw the economy plunge into a seemingly endless recession. The loans have helped balloon its debt, now at 179% of GDP despite a 2012 haircut.

The IMF has been unenthusiastic about joining Greece's current bailout, saying it wants assurances that its debt will be sustainable.

Euro zone finance ministers will discuss these issues on Monday and assess Greece's bailout situation following the parliamentary approval of the latest reforms.

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