Sunday

17th Dec 2017

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.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

  • 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.

Facebook to shift ad revenue away from Ireland

Public pressure about low corporate taxes appear to have pressured Facebook to launch plans to stop routing international ad sales through its Dublin-based headquarters in Ireland.

News in Brief

  1. EU adopts 'track-and-trace' tobacco system
  2. Luxembourg appeals Amazon tax decision
  3. EU leaders agree to open phase 2 of Brexit talks
  4. Juncker: May made 'big efforts' on Brexit
  5. Merkel took 'tough' line on Russia at EU summit
  6. EU leaders added line supporting 'two-state' solution
  7. EU leaders agree to 20 European Universities by 2024
  8. Belgian courts end legal proceedings against Puigdemont

Stakeholders' Highlights

  1. Dialogue PlatformThe Gülen Community: Who to Believe - Politicians or Actions?" by Thomas Michel
  2. Plastics Recyclers Europe65% plastics recycling rate attainable by 2025 new study shows
  3. European Heart NetworkCommissioner Andriukaitis' Address to EHN on the Occasion of Its 25th Anniversary
  4. ACCACFOs Risk Losing Relevance If They Do Not Embrace Technology
  5. UNICEFMake the Digital World Safer for Children & Increase Access for the Most Disadvantaged
  6. European Jewish CongressWelcomes Recognition of Jerusalem as the Capital of Israel and Calls on EU States to Follow Suit
  7. Mission of China to the EUChina and EU Boost Innovation Cooperation Under Horizon 2020
  8. European Gaming & Betting AssociationJuncker’s "Political" Commission Leaves Gambling Reforms to the Court
  9. AJC Transatlantic InstituteAJC Applauds U.S. Recognition of Jerusalem as Israel’s Capital City
  10. EU2017EEEU Telecom Ministers Reached an Agreement on the 5G Roadmap
  11. European Friends of ArmeniaEU-Armenia Relations in the CEPA Era: What's Next?
  12. Mission of China to the EU16+1 Cooperation Injects New Vigour Into China-EU Ties

Latest News

  1. Catalonia, Brexit, and Uber on EU agenda This WEEK
  2. Macron and Merkel take tough line on Poland
  3. Eurozone future needs structural reforms, EU leaders told
  4. Showdown EU vote on asylum looking likely for next June
  5. EU stresses unity as it launches next phase of Brexit talks
  6. Polish PM ready for EU sanctions scrap
  7. Dutchman to lead powerful euro working group
  8. EU mulls post-Brexit balance of euro and non-eurozone states

Stakeholders' Highlights

  1. EPSUEU Blacklist of Tax Havens Is a Sham
  2. EU2017EERole of Culture in Building Cohesive Societies in Europe
  3. ILGA EuropeCongratulations to Austria - Court Overturns Barriers to Equal Marriage
  4. Centre Maurits CoppietersCelebrating Diversity, Citizenship and the European Project With Fundació Josep Irla
  5. European Healthy Lifestyle AllianceUnderstanding the Social Consequences of Obesity
  6. Union for the MediterraneanMediterranean Countries Commit to Strengthening Women's Role in Region
  7. Bio-Based IndustriesRegistration for BBI JU Stakeholder Forum about to close. Last chance to register!
  8. European Heart NetworkThe Time Is Ripe for Simplified Front-Of-Pack Nutrition Labelling
  9. Counter BalanceNew EU External Investment Plan Risks Sidelining Development Objectives
  10. EU2017EEEAS Calls for Eastern Partnership Countries to Enter EU Market Through Estonia
  11. Dialogue PlatformThe Turkey I No Longer Know
  12. World Vision7 Million Children at Risk in the DRC: Donor Meeting to Focus on Saving More Lives