Eurogroup in Crisis Talks Over Greek Bailout Amid Disagreements

Finance ministers from the Eurozone are gathering in Brussels Monday (May 9) in an extraordinary meeting to discuss controversial new measures it is imposing on Athens amid mass strikes and demonstrations.

The Greek government controversially brought forward a parliamentary debate on the bailout conditions package of pension and tax rate and collection changes to special sessions over the weekend, causing mass protests and strikes across Greece.

Members of the communist-affiliated PAME union shout slogans during a 48-hour general strike against tax and pension reforms in Athens, Greece, May 6, 2016.

© REUTERS / Alkis Konstantinidis

The General Confederation of Employees of Greece (GSEE) — the largest trade union body representing 83 unions —  and the civil servants' union federation ADEDY accused the government of a carrying out a "parliamentary coup" by speeding up the controversial legislation, demanded of it as part of the Greek bailout scheme.

As part of its third bailout agreement with its creditors — the European Commission, the European Central Bank, (ECB) and the International Monetary Fund (IMF), known collectively as the Troika — Greece has been forced to raise taxes, improve tax collection, cut state spending and impose severe changes to its state benefit system, in return for bailout money.

The third bailout austerity measures have proved deeply unpopular in Greece, with many demonstrations and rising street crime. The reforms included "streamlining the VAT system and broadening the tax base to increase revenue" and "up-front measures to improve long-term sustainability of the pension system as part of a comprehensive pension reform program."

Troika Divided

There are also divisions within the Troika with the IMF refusing to take part in the third Greek bailout, saying that the terms demanded by the EU are "unsustainable" and that Greece should be allowed debt relief — the writing-off of part of its debts — in the same way as Germany was allowed it following the end of the Second World War.

Wheels up for Brussels. Eurogroup on Greece. Looking for common solutions to common problems on #EuropeDay2016.

— Alexander Stubb (@alexstubb) May 9, 2016​

The IMF is facing a backlash from its own executive, as remaining party to the bailout program is in breach of its own policy of not lending money to insolvent governments.

However, there is also disagreement over extra reforms demanded by the IMF that could amount to another US$4 billion in cuts by Greece, over and above what it has already promised.

Interested in today's Eurogroup on Greece with the IMF and Berlin tussling over Greece's debt & fiscal targets?https://t.co/f94L5NoXVr

— Yanis Varoufakis (@yanisvaroufakis) May 9, 2016​

The latest measures agreed by parliament include reducing pension spending by about two percentage points to around 15 percent of GDP by 2019; setting social security contributions at 20 percent of employees' net monthly income — with 13.3 percent coming from employers and 6.7 percent from employees; and lowering the income tax-free threshold, or personal allowance, to an average of around US$10,000 a year from around US$10,800 and making income bands narrower.