Greece Approves Further Austerity Measures
Greece's parliament yesterday passed further austerity measures, reforming the pension and income tax system. This comes ahead of a meeting today of representatives of the European Central Bank, the International Monetary Fund, and Eurozone finance ministers, to review Greece's €86 billion ($98 billion) bailout.
The austerity measures are worth around €5.4 billion ($6.2 billion) and form the majority of economic reforms that the country agreed with international creditors.
The legislation, which was passed with 153 votes in favor and 144 against after a heated two-day debate, includes simplification of the Greece's pension system and will increase income tax.
Labor unions took to the streets over the weekend to protest changes to the pensions system, which include cuts to entitlements and increases in workers' contribution.
Under the current deal with creditors Athens will have to reach primary budget surplus of 3.5% of GDP by 2018. However, the IMF has said that the figure of 3.5% is not sustainable.
In a letter to Eurozone finance ministers sent on Thursday evening, head of the IMF Christine Lagarde said that it is "higher than we consider economically and socially acceptable."
Lagarde suggested a primary surplus of 1.5%. However, this would involve a substantial amount of debt-forgiveness, which some Eurozone ministers do not approve of.
The IMF and Germany are also asking Athens to legislate an additional €3 billion in contingency measures in case the reforms do not meet the surplus target.
