Greece to approve new cuts to secure cash, debt relief

Prime Minister Tsipras grudgingly accepts to legislate another round of pension cuts and lower tax breaks

Gulf News

Athens: Greece’s parliament on Thursday was to approve a new round of austerity cuts, hoping to secure a pledge of debt relief and loan payment approval by the country’s EU-IMF creditors this month.

Leftist Prime Minister Alexis Tsipras has a slim majority in parliament sufficient to pass the bill in the vote expected around midnight.

Overall, the bill to be approved entails €4.9 billion (Dh19.9 billion, $5.4 billion) in cuts in 2018-2021.

Tsipras grudgingly accepted to legislate another round of pension cuts and lower tax breaks — applicable in 2019 and 2020 respectively — to unlock the cash payment ahead of looming debt repayments in July.

In return, Greece will introduce poverty support measures — such as subsidies on rent and medicine — over the same period of time.

On Wednesday, at least 18,000 people demonstrated in Athens and Thessaloniki in union-sponsored protests against the bill.

Another protest in Athens is scheduled on Thursday ahead of the parliament vote.

Athens hopes that the loan payment will be approved by a meeting of Eurozone finance ministers on May 22.

“We are in the final stretch ... the biggest likelihood is that we’ll have a deal on May 22 or a few days later,” Greek government spokesman Dimitris Tzanakopoulos told Skai TV.

Substantial debt relief

Greece is seeking a clear Eurozone pledge later this month on measures to ease repayment on its huge public debt, which represented 179 per cent of annual output at the end of last year.

The question has served as a point of contention between the IMF and Berlin for months.

In his calls for substantial debt relief, Tsipras faces resistance from Germany, where additional concessions are unpopular with an electorate called to a general election in September.

According to sources familiar with the matter, the IMF and Eurozone countries are close to reaching a compromise, which would clear the way for a global agreement allowing Greece to return to bond markets in 2018.

“Right now, Germany and the IMF are in the final stretch of very tough negotiations going on between them,” Tzanakopoulos said.

Athens also hopes to be finally allowed access to the European Central Bank’s asset purchase programme, known as quantitative easing, or QE, to help its return to bond markets.

“The key thing is to have a (debt) adjustment that will permit the ECB to induct the country to QE,” Tzanakopoulos said.

Debt sustainability

Bank of Greece governor Yannis Stournaras this week said the ECB was likely to discuss the issue provided that European finance ministers decide something “binding” on Greek debt.

“If parliament approves the measures and the eurogroup decides on something more specific and binding on debt sustainability, then, yes, I think the executive board of the ECB will bring the matter for discussion in the governing council,” Stournaras told Politico website on Tuesday.

“There is plenty of time for Greece to benefit from QE,” Stournaras said, adding that inclusion in the purchase programme would “facilitate” Greece’s comeback to financial markets.

“Greece needs to return to markets after the end of this [bailout) programme in 2018,” the Bank of Greece governor said.

There is speculation that Greece plans to issue a three or five-year bond as early as July.

The finance ministry has declined to comment.

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