Greek Parliament passes tough tax reforms

ATHENS • Greek lawmakers have approved tax increases and a new privatisation fund, and freed up the sale of non-performing loans, in exchange for much-needed bailout loans and debt relief.

Athens hopes the measures, two days before a key euro zone finance ministers meeting, will help it unlock the funds it needs to pay International Monetary Fund (IMF) loans, European Central Bank bonds maturing in July and increasing state arrears.

"Greeks have already paid a lot, but this is probably the first time that the possibility of these sacrifices being the last is so evident," Prime Minister Alexis Tsipras told lawmakers before a vote in Parliament on Sunday.

His left-led coalition, re-elected last September on pledges to implement the terms of an €86 billion (S$133 billion) bailout it signed up to last July, has a narrow majority of 153 in the 300-seat Parliament.

The coalition voted in favour of the reforms with only one MP against them. Ms Vassiliki Katrivanou opposed some parts of the reforms as against party values.

The taxes will hit Greeks where it hurts, with increases in value added tax by one point to 24 per cent, more tax on fuel, tobacco and Internet usage, and an extension of a property tax.

The taxes will hit Greeks where it hurts, with increases in value added tax by one point to 24 per cent, more tax on fuel, tobacco and Internet usage, and an extension of a property tax.

Hundreds of demonstrators rallied outside Parliament against the reforms.

"It's a disaster!" said 60-year-old businessman Panayiotis Kehris. "We will cut down on everything, from food to driving."

To appease the angry public, Mr Tsipras said that each time Athens exceeds its annual primary surplus targets, the extra state revenues would go to a social solidarity fund. About €700 million would go to the fund this year, he said.

Talks between Athens and its foreign creditors over the reforms have dragged on for months, mainly due to a rift between the European Union and the IMF over Greece's fiscal progress and resistance in Athens to unpopular measures.

The IMF says Greece cannot achieve a 3.5 per cent primary surplus target in 2018 or later unless it gets substantial debt relief and takes upfront measures. EU lenders, eager to wrap up the negotiations quickly and avoid a new crisis, insist the targets are feasible. But euro zone paymaster Germany needs the IMF to be involved.

To help break the deadlock, Athens has included a contingency mechanism of spending cuts, which will be activated if it is set to miss its bailout targets. The IMF has yet to approve it, a source close to the lenders said.

Mr Tsipras hopes a debt restructuring will help attract investors and convince Greeks their sacrifices are starting to pay off after seven years of austerity.

REUTERS

A version of this article appeared in the print edition of The Straits Times on May 24, 2016, with the headline 'Greek Parliament passes tough tax reforms'. Print Edition | Subscribe