Promising more austerity, Greece cuts deal with global lenders

NEED TO LEGISLATE NEW MEASURES

PROMISING TO cut pensions and give taxpayers fewer breaks, Greece has paved the way for the disbursement of further rescue funds from international lenders and possibly opened the door to reworking its massive debt.

Officials from both sides reached agreement early on Tuesday on a package of bailoutmandated reforms, ending six months of staff-level haggling. Greek finance minister Euclid Tsakalotos announced it with a term associated with papal elections.

“There was white smoke,” he told reporters.

Greece now needs to legislate the new measures, which also include opening up the energy market to competition. That vote is expected on May 16. Euro zone finance ministers would then discuss the disbursement of loans at the next scheduled Eurogroup meeting on May 22.

Athens needs the funds urgently to repay 7.5 billion euro ($8.18 billion) in debt maturing in July. The Greek government is confident the measures will pass Parliament, even though the main opposition party, New Democracy, said it would not support the deal. It was not clear whether the euro zone shared that deadline for the debt-relief portion, but it has in the past pledged to begin talks if various criteria are met. Germany, one of the main lenders and a hardliner in forcing Greek reforms, would only say that the deal was a step forward and that work was not yet complete.

Meanwhile, the International Monetary Fund’s participation in the bailout remains in question. It reckons Greek debt is unsustainable at 179 per cent of gross domestic product and is reluctant to participate in further funding without a debt relief agreement. European Union lenders have ruled out forgiving the debt and refused to discuss such things as cutting repayment rates until after a reformfor-cash deal is cut.

As part of the reforms, Athens has promised to cut pensions in 2019 and cut the tax-free threshold in 2020 to produce savings worth 2 per cent of GDP.

If it outperforms its targets, it will be allowed to activate a set of measures offsetting the impact of the additional austerity, which includes mainly lowering taxes. Athens also agreed to sell coal-fired plants and coal mines equal to about 40 per cent of its dominant power utility Public Power Corp’s capacity.

On the budgetary target level, the lenders are now likely to decide among themselves on Greece’s medium-term primary surplus targets, a key element for granting further debt relief.

Reuters A banner hangs under the logo of National Insurance, a unit of National Bank of Greece, at the company’s headquarters in Athens on Tuesday. The banner reads ‘No to the sale of National Insurance’.