Polls or parliamentary vote on table as pressure mounts for more austerity

11 December 2016
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As it became abundantly clear in the aftermath of last Monday’s Eurogroup, any deal Athens strikes with the country’s international creditors that includes the participation of the International Monetary Fund will be accompanied by the demand for steep primary budget surpluses for three to five years beyond 2018.

Given the tough measures this will entail, Prime Minister Alexis Tsipras is walking a tightrope and is examining contingency plans in case the Washington-based Fund and the European Union reach a deal that will lead to more pressure on the leftist-led government to break its promise not to sign on to more austerity in 2018 and beyond – which critics say would be tantamount to a fourth bailout.

Tsipras has been keen to send out the message that he will not accept pension cuts, reduce the income tax threshold or sign on to further measures if the target of primary surpluses of 3.5 percent is not met. The IMF has repeatedly insisted that it will not join the Greek bailout program unless Greece’s debt is made sustainable and tougher measures are implemented.

At the same time, snap elections are also being mulled, either in the event that a new round of negotiations with creditors to conclude the second review of the country’s third bailout reaches an impasse, or on the grounds that these negotiations should be conducted with a fresh electoral mandate. Moreover, instead of elections, sources say Tsipras’s advisers are suggesting that any deal with creditors that includes the implementation of measures beyond 2019 should be voted on in Parliament, where it will need 180 votes in the 300-seat house to pass.

Analysts have interpreted Thursday’s announcement by Tsipras for a one-off supplement to low-income pensioners and the suspension of VAT hikes on islands in the northern Aegean as a prelude to early elections.

Tsipras’s announcement, which the European Commission had been unaware of, has reportedly angered EU officials while German observers said that all it did was to confirm the view expressed by German Finance Minister Wolfgang Schaeuble that a reduction of the Greek debt – a key demand of Athens – will work as a counterincentive for reforms in Greece. The German minister said that it is undeniable that Greece has not implemented a whole series of reforms, and shot down the claims by “successive Greek governments that these reforms are difficult to implement in Greece.”

“The necessary steps are not easy to take,” he said.

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