BY Fraser Tennant
In the latest instalment of the saga that is the Greece austerity programme, the country’s parliament has approved a new austerity bill that is intended to assist in the release of the latest tranche of bailout funds from the country’s creditors.
The new austerity bill is worth €4.9bn and is designed to cover the period 2019 to 2021. The Greek parliament has also voted for a simultaneous relief package worth €7.5bn over the same period – to counterbalance the negative effect of pension cuts and a lower non-taxed threshold.
Unsurprisingly, the announcement of the proposed cuts was met with an angry response, with thousands of protesters clashing with police outside parliament.
The relief package also includes: (i) a decrease of tax and income rate, electricity and household grant for vulnerable social groups; (ii) broadening of public investment projects to combat unemployment and support small and medium size enterprises (SMEs); (iii) , opting-out from health coverage cost for weak income groups; and (iv) free access to primary healthcare services. Furthermore, Greece’s Syriza government is committed to implementing the package under the condition that creditors will proceed to the specification of mid-term debt relief measures.
However, following the announcement of the austerity bill and relief package, eurozone finance ministers failed to agree a debt relief plan for Greece – a breakdown in talks which has been blamed on an inability to agree on whether the country will be able to repay its debts in the long run. The failure also raises the possibility of a crisis for the single currency should Greece miss a loan a loan repayment.
“The Greek government has been putting all efforts to drag the country outside the Memoranda in 2018,” says Dim Rapidis, political and communications adviser at Bridging Europe. “Creditors share the same view, but the problem is that Germany's minister of finance, Wolfgang Schaeuble, seems reluctant to abide by the creditors commitment to provide debt relief.
"A possible deadlock in agreeing concrete mid-term debt relief for Greece could blow the entire deal. The Greek government, the European Commission and the European Stability Mechanism are pushing the German government to accept debt relief, but the latter wants to delay such decision and discuss it after domestic elections in September 2018," he adds.
Should a decision on debt relief be reached, the European Central Bank may then include Greece in its quantitative easing programme – a move which would give Greece the green light to seek funds from the markets and begin the process of rebuilding its shattered economy.