Greece’s Parliament Has Just Approved Even More Austerity Measures

Credit: time.com


(ATHENS, Greece) — Greece’s government secured parliamentary approval late Thursday for a new batch of creditor-demanded measures that will impose further income losses on austerity-weary Greeks over the next three years but pave the way for a modest debt relief deal.


The legislation was backed by all 153 deputies in Prime Minister Alexis Tsipras’ left-led coalition. All 128 opposition lawmakers present in the 300-member parliament stood against the measures in a vote just before midnight.


The vote was a key requirement for Greece’s European creditors to release a new bailout installment, without which the country would struggle to meet its debt servicing obligations in July.


But it will also accelerate negotiations on easing Greece’s debt repayment terms, which Athens hopes could be concluded as early as next week at a meeting of European finance ministers.


“Now the ball is in our creditors’ court,” Tsipras said after the vote. “We expect, and are entitled to, a decision at Monday’s meeting, that will adjust the Greek public debt in a way that matches the Greek people’s sacrifices.”


Earlier Thursday, about 15,000 people protested peacefully against the cutbacks in a second day of demonstrations outside parliament. The demonstrations were called by major trade unions, a day after a general strike disrupted services across the country.


Dozens of masked youths broke out of the crowd to throw gasoline bombs at police guarding approaches to the parliament building. They were repulsed with tear gas, and police said one man was arrested and two more detained on suspicion of taking part in the violence.


The cutbacks, worth some 4.9 billion euros ($5.45 billion), will be implemented through 2020 — a year beyond the mandate of Tsipras’ government. The bulk of the measures involve a sharp reduction in the income tax-free threshold and further cuts in pensions.


On Thursday morning, hundreds of pensioners braving heavy rain marched to parliament to express their anger.


“No more tax theft,” they chanted.


Pensions have been cut sharply over the past seven years as successive Greek governments have slashed spending in return for bailout money to avoid bankruptcy.


Tsipras, who is badly trailing the main opposition conservatives in opinion polls, defended the new austerity measures Thursday. He played up the prospect of alternative benefits and anti-poverty spending that his government has promised — provided, however, it meets ambitious budgetary targets for years to come.


“The counter-measures will provide relief to thousands,” he said, adding that the entire package presented to parliament would open the way to a strong economic recovery and an end to Greece’s supervision by its creditors.


Deputy Finance Minister George Houliarakis said the austerity measures are a “necessary compromise” between meeting creditors’ demands and extending the uncertainty over the country’s economic recovery.


“This is the only road map that guarantees … the country’s exit from the great Greek recession,” Houliarakis told lawmakers.


Finance Minister Euclid Tsakalotos said he expects restrictions on bank cash withdrawals and capital flows imposed in 2015 can be lifted by the end of this year.


The government also hopes to gingerly return to tapping international money markets with a bond issue later this year, which would be the first since 2014.


Tsipras initially came to power in 2015 promising to bring an end to the austerity that had been imposed during Greece’s first two international bailouts. But his coalition government soon found itself facing a disastrous default as the country was unable to service its debt without external help.


The prime minister signed up for a third bailout later that year, but not before calling a referendum that led to a run on the banks, forcing the government to impose capital controls. The banking restrictions and limits on cash withdrawals remain.


Unions and the opposition compared the new reforms to those of a fourth bailout, but without the corresponding funding from international creditors.


“Our country is being turned into an austerity colony,” Kyriakos Mitsotakis, head of the conservative main opposition party, told parliament. “(The government) was seeking to get (bailout) funds without (austerity) measures, and instead got measures without the funds.”



Harvard Business Review

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