Business World

Wednesday 22 January 2020

Greece downs tools as vital vote on €13.5bn cuts needed for aid

Nicholas Paphitis

FACING its greatest challenge since assuming power in June, Greece's fragile coalition government is heading for a cliffhanger vote today on fresh austerity measures with the country paralysed by a 48-hour general strike.

Tens of thousands of people took to the streets yesterday to protest over policies that have increased poverty and unemployment.

With Greece's eurozone future dependent on passage of the €13.5bn package, the finance minister, Yannis Stournaras, implored wavering MPs to back the bill, saying it was the only way of assuring debt-stricken Athens did not default on its mountain of debt.

"The country has to adopt this package of measures to which it has committed to avoid bankruptcy," the technocrat told a parliamentary committee on the eve of the ballot.

"We are now at the most crucial crossroads and we have to make the right decision. The road ahead is difficult and steep but it is our historic responsibility to complete the effort that we have begun."

International creditors at the EU and IMF say adoption of the budget cuts is crucial to releasing €31.5bn in rescue funds that are desperately needed by a state whose coffers are due to run dry by November 16.

The country's embattled prime minister, Antonis Samaras, has pledged the measures "will be the very last" to be imposed on a nation whose disposable income has dropped by an estimated 35pc since the eruption of Europe's debt crisis in Athens three years ago.

But with pensions and wages set to be slashed, taxes increased and the retirement age raised, the promise has fallen on deaf ears with unions and anti-bailout forces, led by the radical left main opposition Syriza party, vowing to step up opposition on the street and in the corridors of power.

Meanwhile, France is to grant €20bn in annual tax credits to companies as a way of lowering labour costs, in a tougher-than-expected response to calls from business leaders to reverse decades of industrial decline.

Business leaders said they would have preferred direct cuts to labour costs but the package is in the right direction.

Economists said Socialist President Francois Hollande was sending the right message to outsiders concerned that France's record-low bond yields might understate its economic fragility next to Germany. (Reuters)

The government also aims to save €12.5bn from cuts to public spending and health insurance from next year.

Irish Independent

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