The Strategist

Greece adopted reforms for a new tranche of 2.8 billion

09/28/2016 - 13:40

Greek lawmakers have approved reforms on budget cuts, retirement benefits and acceleration of privatization in exchange for financial assistance from international lenders, reported Reuters.

The Greek Parliament met conditions for the next tranche of financial assistance. Simple majority of the Parliament voted to reform the electricity market, and transfer public assets to the sovereign wealth fund.

Adoption of the reforms can unlock a credit tranche in the amount of 2.8 billion euro. A final decision will be taken this week after a meeting of euro zone finance ministers' deputies. A document on financial aid to Greece totaling 86 billion euro in loans was signed in mid-2015. 

Public sector workers' union ADEDY is opposed to transfer public assets to the sovereign wealth fund. The union says it would open way for urgent sale of strategically important state-owned companies to private investors. In its statement, the union members noted that "health, education, electricity and water is not a commodity: they belong to the people."

Workers of the water sector in Athens and Thessaloniki took to the streets to protest against transfer the government's share packets in the new fund. In response to these accusations, the government said there are no plans to sell state assets, but instead to introduce a more effective management of the enterprises.

The second round of negotiations on a new tranche to Greece will begin in mid-October, when representatives of the EC, ECB and IMF will be visiting Athens. At the same time, they are also going to discuss the labor reform, which is extremely unpopular among the Greek population. 

In early September, the Greek Prime Minister Alexis Tsipras said that his country would be extremely difficult to return to sustainable economic growth without relief of debt burden.

In an interview with the French media, Tsipras said that in 2016 the Greek economy, suffered from the previously noted decline, will start to improve in 2016 and will grow by 2.7% already next year. Prior to this, growth of the economy was hindered by reluctance of the euro area to review Athens’s debt.

According to the Greek prime minister, the recovery has been slow, as the Greek authorities did not notice any attempts to somehow ease the debt burden from their partners’ side. Greece will be difficult to return to growth, if the EU refuses to consider this issue.

Tsipras believes that European politicians have to make a step forward, but this should happen before the elections in Germany in September 2017, as Athens cannot wait so long.

"We have 27 democratically elected governments of Europe. Germany is not the only country, which holds the elections.", - said Head of the Greek cabinet.

Germany, the Europe's largest economy, is criticizing economic policy of Greece. The country is refusing to discuss reduction of Athens’ debt to the European Union before the elections.

In addition, Tsipras said that he considers unacceptable the fact that only 3 thousand migrants were moved from Greece to Western Europe in the current year, whereas previously the EU authorities promised to take 33 thousand refugees away from Greece.