Greece Set for Austerity Vote to Secure Bailout Cash
Parliamentary vote comes ahead of eurozone finance ministers meeting on disbursement of funds
ATHENS—Greece’s parliament is expected to vote late Sunday on a raft of fresh taxes and austerity reforms that the country must legislate to unlock further rescue loans, ahead of a crucial eurozone finance ministers meeting on Tuesday.
The bill includes the last portion of an austerity package worth €5.4 billion ($6.06 billion), or 3% of the country’s gross domestic product, which Greece has agreed on with its international creditors to implement by 2018 in exchange for fresh bailout funds under the terms of its third bailout deal.
Parliamentary approval could pave the way for a green light from eurozone finance ministers on Tuesday for the next disbursement of funds to Greece. But that could be complicated by disagreements between the International Monetary Fund and eurozone governments over Greece’s debt relief.
In contrast with the European institutions overseeing the bailout—the European Commission and the European Central Bank—the International Monetary Fund says Athens won’t be able to reach its bailout targets and generate a 3.5% budget surplus when stripping out interest payments in 2018, based on the austerity measures.
The IMF has said it would only sign up to the Greek bailout if Germany agrees to debt relief. But German officials are seeking to delay any debt restructuring until the end of the current Greek bailout program in 2018, so that Germany’s parliament, the Bundestag, would pass such measures only after Germany’s 2017 elections.
To meet its targets, Athens was asked to set up a “contingency mechanism” of additional austerity measures worth some 2% of GDP.
The measures being voted on Sunday include new taxes on fuel, tobacco, alcohol, Internet, pay TV, hotel stays, cars, changes in property tax, as well as a rise in the basic value-added tax rate, applied to most goods and services, from 23% to 24%.
It also includes the framework that would free up the sale of nonperforming loans owned by Greek banks, as well as the establishment of a new privatization fund that would manage its assets to execute its investment policy and reduce its debt.
The Greek parliament is also expected to vote on the fiscal brake mechanism that would automatically cut state spending if Greece misses its budget targets.
The measures are expected to pass, with backing from the 153 lawmakers from the ruling left-wing Syriza party and its junior coalition partner, the right-wing Independent Greeks.
How much the next bailout tranche would be is still to be determined, but European Union officials indicate it could be €10 billion.
A deal that either bridges the IMF-German gap or that leaves the IMF outside the bailout is needed by June—or July at the latest—so that Greece can be kept afloat with rescue loans.