Greek MPs approve toughest austerity measures yet amid rioting

Crucial meeting of eurozone finance ministers will be held on Monday amid backdrop of violence in Athens over cuts worth €5.4bn

Greece’s leftist-led coalition will turn to the lightning rod issue of debt relief on Monday at a crucial meeting of eurozone finance ministers following the late-night approval in Athens of laws overhauling the country’s tax and pension system.

Amid violence on the streets and a three-day general strike that had brought much of the country to a halt, the embattled government pushed the legislation through parliament with the backing of its 153 MPS. Addressing the 300-seat House, prime minister Alexis Tsipras said: “We are determined to make Greece stand on its two feet at any cost.”

Rioters pelted police with stones while black-clad anarchists lobbed flaming Molotov cocktails, after Athens’s finance minister warned Greece could become a “failed state” if it was pushed too far.

The controversial bills, worth €5.4bn (£4.27bn) in budget savings, were seen as the toughest reforms the thrice bailed-out nation has been forced to enact since its debt crisis began. The once firebrand Tsipras called the vote in advance of tortuous bailout negotiations being concluded in a bid to placate eurozone finance ministers ahead of Monday’s meeting.

In an unprecedented step, lenders are expected to focus on the nation’s staggering debt load – at over 180% of GDP the largest in Europe – with Athens keen to secure a pledge that a write-down is in the offing.

But creditors are also demanding a new set of contingency measures to ensure the country achieves agreed stringent fiscal targets by 2018.

Public anger against Greece’s lenders is palpable. “Every day they destroy our country a little more,” said Vassilis Papadopoulos, a young waiter, of the international creditors keeping the debt-stricken nation afloat.

Riot police disperse protesters
Riot police disperse protesters during clashes that broke during a protest against reforms to the tax and pension systems. Photograph: Orestis Panagiotou/EPA

“OK, I accept we have to change but, like this, that’s not fair. How can anyone survive on a national monthly pension of €384? How can a state function when over 25% of its population is unemployed?”

Ahead of Monday’s eurogroup meeting meeting, finance minister Euclid Tskalotos warned darkly of the perils involved in demanding yet more cuts of a nation whose economy has shrunk by more than 25% in the six years since successive governments began slashing budgets in return for bailout aid.

“Nobody should believe that another Greek crisis, leading perhaps to another failed state in the region, could be beneficial to anyone,” he wrote in an unusually dramatic letter to his eurozone counterparts. “There is no way that such a package can be passed by the current government, or by any democratic government that I can imagine.”

For a time, it seemed, Greece’s economic woes had gone away. Eclipsed by Europe’s refugee crisis, terrorist attacks and the fears engendered by Britain’s forthcoming EU referendum, Athens’s debt drama appeared to disappear.

But policymakers are discovering that may have been wishful thinking. The nation that last year came close to exiting the euro – triggering the continent’s biggest existential crisis in decades – is once again close to the brink.

Economists, politicians and investors all speak of uncertainty – an uncertainty reinforced by the wildly divergent views of creditors over how best to put the country back on its feet.

Demonstrator wearing a gas mask
Demonstrator wearing a gas mask during the protests. Photograph: Angelos Tzortzinis/AFP/Getty Images

Central to that argument is Greece’s ability to achieve a primary surplus of 3.5% by 2018. The International Monetary Fund, which believes the surplus should be no higher than 1.5%, says substantial debt relief is the only way the country can recover economically. On Friday the fund’s managing director, Christine Lagarde, threatened to pull out of Greece’s rescue programme altogether if Brussels failed to yield. Athens has received more than €250bn in bailout funds in what has amounted to the biggest financial rescue programme in global history.

Germany’s hardline finance minister, Wolfgang Schäuble, fearing hefty losses on the loans Berlin and other eurozone members have made, has steadfastly ruled out debt forgiveness.

But Tsipras won unexpected support at the weekend from Germany’s vice-chancellor, Sigmar Gabriel. In a statement to Reuters, Sigmar, who is also the economy minister, insisted debt relief was now the only way of plucking Greece out of its seemingly endless economic death spiral. “The eurogroup meeting on Monday must find a way to break the vicious circle,” he wrote. “Everyone knows that this debt relief will have to come at some point. It makes no sense to shirk from that time and time again.”

Protesters throw flares at riot police
Protesters throw flares at riot police during the demonstration. Photograph: Angelos Tzortzinis/AFP/Getty Images

The overhaul of the pension system – along with unpopular tax measures and an increase in VAT – form the central plank of a €5.4bn package of budget cuts and reforms that Tsipras has agreed to enact in exchange for rescue funds from a third, €86bn bailout the country signed up to last summer.

After nine months of wrangling over the latest austerity measures, Tsipras had hoped Sunday’s vote would unlock further funds.

In July Greece faces €3.5bn in debt repayments. Without bailout aid, once again it confronts the spectre of default and likely ejection from the single currency.

“We are, with a little less drama, back where we were last year,” noted Christos Memis, a veteran political commentator now in charge of news portal

“The prime minister and his aides are a little more mature, a little wiser. They like power and I think are determined to come to an agreement with Europeans but there are hurdles not least in Syriza,” he said of Tsipras’ radical left coalition party.

With the UK’s looming EU referendum, eurozone partners have made clear that bailout negotiations have to be wrapped up by the end of May or be put on hold until July when markets will once again be rattled by the prospect of a Greek default.

Speaking to the Guardian ahead of the vote, the culture minister Aristides Baltas, said the unpopular reforms would be enforced even if no one believed in them.

“Nobody in the government agrees with this agreement but we have signed it and have made a historical pledge to implement it,” said the French-trained philosopher who played a pivotal role in drawing up the ruling Syriza’s party’s founding programme. “We know it will be hard for Greeks.”


Helena Smith

The GuardianTramp

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