May 22, 2016
The Greek parliament approved the latest bill with measures covering 1% of GDP in indirect taxes including a 1pp rise in VAT, a privatisation fund that gives creditors a say in future sales, and the sale of non-performing loans, all subjects that were a red line for Syriza only a couple of months ago. The bill was backed by all 153 MPs in the majority though one of them, Vasiliki Katrivanou, voted for the bill in principle, but against two of the measures, the privatisation fund and the automatic cut system. She resigned as MP in a letter this morning, To Vima writes. Reportedly she was asked to step down in order that Syriza not to lose the seat. She will be replaced by George Kyritsis, according to the Wall Street Journal.
There was some last-minute drama on Friday. Syriza proposed a two-year pay freeze for 2017 and 2018, the so-called "special" pay scale for civil servants - including for doctors, academics, policemen and military personnel. This triggered an immediate reaction from coalition partner Anel. In an emergency meeting, they decided to postpone the wage freeze until the end of the year. They now need to come up with equivalent measures worth €118m. Defence minister Panos Kammenos said some savings could come from arms programmes.
Syriza made 130-160 changes to the bill while it was discussed in parliament, Macropolis reports. The most significant one was the last one Alexis Tsipras announced in his speech. He said they will use 30% of the primary surplus outperformance in 2015 for debt reduction (€500m), 30% for paying off arrears, and 40% (€700m) to create a solidarity fund. It is hard to tell how important this last minute intervention was, but the result is a significant victory for Tsipras. It is now up to the lenders to approve and to find a way forward on debt relief.
New Democracy voted against the bill despite earlier rumours that it might accept it. And there was a heated exchange in the two days of debate. Kyriakos Mitsotakis accused the government of giving away Greece’s sovereignty by allowing creditors a say in the privatisations, with no limits on the sales and a life span for the fund of 99 years. He also outlined his economic programme saying he would ask the institutions to reduce the medium-term primary surplus target from 3.5% to 2% of GDP.
We also have stories on the kind of debt relief needed for Greece, and what is on offer; on the impasse in the Austrian presidential elections; on the outcome of the Cyprus elections; on a Greek court putting the Turkey deal on hold; on how to make Spain’s pensions sustainable; on sovereignty and the rule of law in Poland; and on the populist backlash.