Greek PM_shuttershock.jpg

Alexis Tsipras_Shuttershock

The measures were approved on Sunday night, ahead of today’s meeting of eurozone finance ministers and as protests against the unpopular measures raged just outside of parliament.

The country’s leftist-led government hopes the reforms will help persuade creditors to sign off on the long-awaited first review of Greece’s bailout programme at today’s meeting, which will decide whether the country has met the terms of its €86bn rescue package.

If so, the review will unlock more than €5bn, ensuring Greece will be able to make billions of dollars of debt repayments due in June and July and potentially paving the way for talks on debt relief.

Fears had been growing of a renewed crisis in the eurozone as Greece clashed with creditors on their demands for austerity reforms.

At the end of April, Alexis Tsipras, Greek prime minister and head of the left-wing Syriza party, called for an emergency European Union summit citing concerns about a “new cycle of uncertainty” for Greece and Europe after the country almost crashed out of the eurozone last summer.

Initially elected on an anti-austerity ticket, following last summer’s crisis Tsipras was eventually forced to agree to a host of harsh austerity measures to secure Greece’s third multi-billion dollar bailout.

The reforms entail pension cuts and tax hikes with the aim of generating savings equivalent to 3% of gross domestic product, working towards its agreements with creditors to reach a 3.5% budget surplus target in 2018.

This will allow Greece to regain access to bond markets and help make its debt sustainable.

Speaking to lawmakers in the Greek parliament yesterday, Tsipras defended the new measures as essential. He stated that Greece had an important opportunity to break out of a “vicious cycle” into a “virtuous” one, according to Reuters.

But the measures are unpopular with the public and trade unions.  Amid a three-day general strike, anti-austerity protesters gathered in Athens and Greece’s second largest city Thessaloniki in the thousands yesterday.

While mostly peaceful, some protesters hurled petrol bombs and police responded with tear gas.

The reforms faced opposition inside parliament too, where Tsipras’ is supported by a slim majority of coalition lawmakers in a 300-seat house.

After a debate, all 153 coalition votes went in favour of implementing the measures, with 144 votes against.

Specific measures include the introduction of a national pension of €384 a month after 20 years of work, cuts to benefits for poor pensioners, income tax increases for higher earners and lower tax-free thresholds.

More taxes are also reportedly being mooted, including value added tax increases and additional duties on fuel, tobacco, hotel stays and internet use.

In a letter to eurozone finance ministers, published last week by the Financial Times, International Monetary Fund managing director Christine Lagarde said all parties to the bailout package were now near agreement after months of wrangling.

The new measures are likely to give creditors more confidence that Greece will stay the course with their programme, but some issues remain problematic.

The IMF and Germany are insisting that Athens legislate for additional €3bn in “contingency measures” in case Greece misses the programme’s budget surplus targets.

Athens has argued this is not possible, and instead put forward a proposal for further broad-based cuts that would only be triggered if the programme looks like it is straying from the agreed course.

However, the IMF and Berlin have rejected this counterproposal, leading to yet another stalemate between Greece and its creditors that could put the potential for any agreement being made at today’s meeting at risk.

In a statement, the eurogroup said the meeting will discuss “a comprehensive package of policy reforms as well as the sustainability of Greece’s public debt”.

“Both elements need to be in place in order to finalise the programme’s first review and unlock further financial assistance to Greece.”

European Commission chief Jean-Claude Juncker said yesterday that Greece had “basically achieved” the objectives of its creditors, and hinted that discussions around debt relief could be on the table.

But Lagarde has said there are significant gaps in the country’s reform offers and stressed the need to revise down the budget surplus target, stating it is counterproductive to expect Greece to meet it.