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With mounting pressure from Euro creditors, International Monetary Fund (IMF) and Greek trade union, the Greek parliament voted on a controversial tax and pensions overhaul on Sunday amid protests against the unpopular reforms in Greece.
Leftist Prime Minister Alexis Tsipras, whose grass-root supporters object to the reforms, pragmatically backs the package of painful measures demanded by the terms of its July bailout in the hope that Monday’s Eurozone meeting in Brussels could move on to the crucial issue of debt reduction.
As woes never cease Greece’s budget deficit has widened as it struggles to keep up with huge debt payments, which the IMF sees unsustainable.
Unfazed by the conditions of Euro creditors and IMF, trade unions are opposed to the reforms and pledged to step up the pressure with a general strike. But one doubts very much whether such a pressure can materialise. The truth is Greece has to pay its loan installments to creditors to continue cooperation with the international creditors to keep its economy alive.
Sadly, the painful austerity measures are bitter bills Athens has to swallow. They are part of package of measures demanded by the EU and IMF in exchange for a huge 86 billion euro ($95 billion) bailout for debt-crippled Greece agreed last July.
But the appeal from Greek Finance Minister Euclid Tsakalotos that the eurozone should approve the reforms, warning of a “failed state†if the Brussels talks run aground, was genuine. Athens faces conflicting internal and external
pressures that could jeopardise national interests.
The unpopular reforms in Greek would reduce Greece’s highest pension payouts, merge several pension funds, increase contributions and raise taxes for those on medium and high incomes.
While lobbying for approval of the reforms, Tsipras defended the measures, telling lawmakers from his left-wing Syriza party — which holds a slim majority in the parliament — that they would spare the poorest. This is a last ditch attempt to convince the trade union to back the reforms. He made it clear to Greeks either to back reforms or the government will collapse.
But ahead of the Brussels meet, the creditors themselves have some
differences to sort out over extra reform measures demanded by the IMF.
IMF chief Christine Lagarde has warned that there were “significant gaps†in Greece’s reform offers, while European Commission head Jean-Claude Juncker said the country had “basically achieved†the objective of the measures required by creditors.
Though both the EU and the IMF differ over certain issues regarding the progress made by Greece, they agree over possible debt relief will be on the agenda.
Even as Greek lawmakers began debating pension and income tax reforms that will be key to unlocking international aid, European creditors circulated the draft of a new proposal that would burden Athens with additional austerity measures.
The IMF questions Greece’s ability to post a fiscal surplus before interest payments of 3.5 percent of GDP within two years, as stipulated under the European programme. But said it would be open to disbursing a new loan that would be separate from the European bailout.
Meanwhile, Euro-area governments are reviewing whether to release the second installment of an 86-billion-euro bailout for Greece, six months after it was initially scheduled.
Given the gravity of Greece’s status, the EU finance ministers will discuss the austerity measures attached to the latest review of Greece’s bailout, and
possible debt relief initiatives in light of persistent IMF demands.
The EU and IMF should surely dangle another opportunity to bail Athens out from the fangs of economic crisis.