Greek government submits reform bill seeking fresh bailout aid

By Reuters/Renee Maltezou   May 18, 2016 | 05:29 pm PT
The Greek government tabled a bill in parliament on Wednesday that raises taxes, frees up the sale of banks' non-performing loans and sets up a new privatization fund with its foreign creditors in exchange for more bailout funds.

Legislation submitted to the Greek parliament late on Wednesday increases the upper band of value-added tax (VAT) to 24 percent from 23 percent, adds tax on fuel and tobacco, and defines the process by which banks can sell non-performing loans, a bane for Greek banks.

Parliament will also vote on a contingency mechanism to automatically impose spending cuts that will be activated only if Athens, which has received three international bailouts since 2010, misses its latest fiscal targets. International lenders want a mechanism that will compel Greece to cut overheads to keep Greece within a 3.5 percent primary deficit target by 2018.

Passing the latest reforms before a meeting of euro zone finance ministers meeting at the so-called Eurogroup on May 22 is one demand of international lenders to ensure the review is wrapped up. It would unlock the next tranche of funds that Athens needs to pay back International Monetary Fund loans, state arrears and ECB bonds maturing in July.

Finance ministers from the shared currency bloc are also expected to raise the issue of debt restructuring.

Athens hopes that reprofiling its mountain of debt will help it regain market access and convince its public that the six years of austerity they have endured are beginning to pay off.

Prime Minister Alexis Tsipras has a narrow majority of 153 lawmakers in the 300-seat parliament and the vote is expected to test his coalition government's popularity.

The tax increases are designed to generate about 1.8 billion euros, the equivalent of 1 percent of national output.

These measures are in addition to pension reforms and changes to income tax that were approved by parliament on May 8, which were the equivalent of about two percent of gross domestic product.

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