Thursday

24th Sep 2020

Greece passes new austerity measures, hopes for debt deal

  • "We are passing to a positive agenda for the country and society," said Greek prime minister Alexis Tsipras about the bill. (Photo: Spyros Papaspyropoulos)

The Greek parliament adopted a new set of austerity measures on Thursday evening (18 May), which the government hopes will allow a new tranche of international aid and debt relief measures.

The bill includes pension cuts and tax increases in order to save €4 billion until 2020. It was passed with only 153 votes (out of 300 MPs), which came from the MPs supporting the coalition government of Alexis Tsipras.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

  • German finance minister Wolfgang Schaeuble has been wary of granting Greece debt relief before it has done enough to implement the bailout programme. (Photo: World Economic Forum)

The measures had been agreed in principle at a Eurogroup meeting in early April and hammered out in talks between the Greek government and experts from Greece's lenders – the European Commission, the European Central Bank, the European Stability Mechanism and the International Monetary Fund (IMF).

In exchange for the measures, to be implemented immediately, the lenders and eurozone finance ministers also agreed to include "expansionary measures" in the bill, such as support for children, renters or poor pensioners.

These social measures will be implemented only if Greece reduces its deficit and reaches a budget primary surplus of 3.5 percent of GDP.

"We are passing to a positive agenda for the country and society," Tsipras told MPs ahead of the vote.

He said that Greece was "heading toward a comprehensive agreement to extricate the country from the memorandums" – the three bailout agreements signed since 2010 that outline the budget cuts and structural reforms.

Tsipras insisted that the country will exit the memorandum programmes in 2018, when the current one ends, and afterwards will not need another one.

"The fourth memorandum is all yours," conservative opposition chief Kyriakos Mitsotakis told Tsipras in the debate ahead of the vote.

Mitsotakis said that "the homeland is being turned into an austerity colony with no end".

50/50 chances

The bill adopted on Thursday was a condition to close the second review of the bailout programme signed in 2015, and unlock a new loan – which could be up to €7 billion.

Eurozone ministers will review it at a Eurogroup meeting on Monday. But their green light for the new payment will mainly depend on the IMF, which has said it would sign it off, but only if it thinks that the measures also have a positive impact on Greece's long-term debt.

The IMF, whose rules make it impossible to help countries whose debt is not sustainable, says that the measures agreed so far are not enough to reduce Greece's debt and that the EU must agree on debt relief measures.

Even if the last Greek austerity bill complies with the creditors' demands, no payment will be made if the IMF is not satisfied.

An EU official said earlier this week that the chances of an agreement on Monday were "between 50/50 and 50/50".

"It's not a secret that there are differences between the institutions," the official added.

The main obstacle to reaching an agreement has been Germany. German finance minister Wolfgang Schaeuble has been wary of granting Greece debt relief before it has done enough to implement the bailout programme.

"We are leaving the game at several parties, it is now a game at two," a eurozone minister said after the last Eurogroup meeting, referring to the IMF and Germany.

He said, however, that it would "be easier to deal with" than the usual negotiations between the EU institutions, Greece and eurozone countries.

Moderate recovery

"We deserve and we expect from Monday's Eurogroup a decision regulating debt relief which will correspond to the sacrifices of the Greek people," Tsipras said on Thursday.

Although there is no deadline for an agreement, Greece would need fresh money before it faces debt repayments in July.

The uncertainty over the conclusion of the second review, which should have been done more than a year ago, also has consequences for the Greek economy.

Last week, the European Commission revised its growth forecasts downwards for Greece. It said it expected 2.1-percent growth this year, down from a 2.7-percent growth forecast in an earlier assessment in February.

"The recovery looks set to remain moderate due to the delays in the closure of the second review of the [bailout] programme," the EU commission noted.

It said that "improving consumer and investor sentiment is expected to be the fundamental driver of growth in the near term".

While Greek MPs were adopting the new set of austerity measures, clashes took place outside the parliament in Athens. Demonstrations had been organised to protest against the bill while the country faced a second day of strikes in a row.

Eurogroup makes 'progress' on Greek deal

Eurozone ministers endorsed an agreement in principle between the Greek government and its creditors over a new package of reforms. But talks on fiscal targets and debt could still block a final agreement.

Greek bailout talks to 'intensify'

Greece and its creditors will meet in Brussels later this week to unblock negotiations needed for a new tranche of financial aid, amid concerns over the country's economic situation.

Portugal held up as symbol of EU recovery

Portugal to sail out of troubled waters after eight years of financial crisis, EU commission predicted, amid broad but "fragile" recovery in European economy.

News in Brief

  1. Belgium: masks no longer mandatory from October
  2. Report: China built 380 Muslim internment camps
  3. Belgian government formation in final phase
  4. Lukashenko sworn in at secret ceremony
  5. Study: No-deal Brexit more costly than corona for UK
  6. Polish miners in underground protest against energy plan
  7. EU animal farming emits more CO2 than cars
  8. Navalny leaves Berlin hospital after poisoning attempt

EU forecasts deeper recession, amid recovery funds row

The economies of France, Italy and Spain will contract more then 10-percent this year, according to the latest forecast by the EU executive, as it urges member state governments to strike a deal on the budget and recovery package.

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Council meets Belarusian opposition leader Svetlana Tichanovskaja
  2. Nordic Council of MinistersNordic Region to invest DKK 250 million in green digitalised business sector
  3. UNESDAReducing packaging waste – a huge opportunity for circularity
  4. Nordic Council of MinistersCOVID-19 halts the 72nd Session of the Nordic Council in Iceland
  5. Nordic Council of MinistersCivil society a key player in integration
  6. UNESDANext generation Europe should be green and circular

Latest News

  1. EU migration pact to deter asylum
  2. 'Era of EU naivety ends', MEP pledges on foreign meddling
  3. Anti-mask protesters pose challenge for EU authorities
  4. EU 'failed' to safeguard civic freedoms during pandemic
  5. The corruption fuelling the Bulgaria protests
  6. EU countries stuck on rule of law-budget link
  7. EU states struggle to better sync Covid-19 measures
  8. EP groups drop homophobe from Sakharov prize

Stakeholders' Highlights

  1. Nordic Council of MinistersNEW REPORT: Eight in ten people are concerned about climate change
  2. UNESDAHow reducing sugar and calories in soft drinks makes the healthier choice the easy choice
  3. Nordic Council of MinistersGreen energy to power Nordic start after Covid-19
  4. European Sustainable Energy WeekThis year’s EU Sustainable Energy Week (EUSEW) will be held digitally!
  5. Nordic Council of MinistersNordic states are fighting to protect gender equality during corona crisis
  6. UNESDACircularity works, let’s all give it a chance

Join EUobserver

Support quality EU news

Join us