The narrow approval of fiscal reforms demanded by troika lenders in the Greek parliament late last night will put further pressure on Antonis Samaras’s government, potentially resulting in early elections.
Robin Bew, chief economist and editorial director of the Economist Intelligence Unit, said today:
#Greece agrees civil service layoffs to keep bailout alive. But politics very fractious - expect early election in 2014— Robin Bew (@RobinBew) July 18, 2013
The bill was passed after midnight last night by 153 to 140, and will allow the country to receive its next tranche of aid of nearly €7 billion. It includes plans for the laying off of 15,000 state workers by the end of 2014 and the placing of 12,500 public sector staff into a mobility scheme to force them into another job or make them redundant - proposals that have sparked the mass protests being held in the country.
In addition, Greece is planning to cut €100m from its defence budget to finance a reduction in value added tax at restaurants and bars from 1August 2013. The tax cut is the first of note since the Greek bailout began in 2010, and will be made permanent if deemed a success by the troika. "For the first time, not only are we averting something unwelcome, we are implementing some positive changes," said Samaras in a televised statement.
German finance minister Wolfgang Schauble is visiting the country today for the first time since the debt crisis began in 2009. He'll be looking to demonstrate confidence in the eurozone ahead of German elections in September. Schauble will be signing a memorandum of understanding to lend €100m to Greek firms from the German development bank Kreditanstalt für Wiederaufbau. Protests have been banned in Athens's Syntagma Square from 07:00 to 18:00 today while Schauble is in the country - a move derided by some as undemocratic.