Greece debt crisis: recession fears grow as austerity measures pass

Greece's parliament on Thursday adopted a series of tough reforms and budget cuts demanded by the country's creditors in exchange for a bailout package aimed at keeping the country in the eurozone.

   But the political authority of Greek Prime Minister Alexis Tsipras was weakened by some notable defections from his own radical leftist Syriza party.

   Overall 229 Greek MPs voted in favour of the bailout measures while 64 MPs voted against the measures that include sales taxes hikes and cuts to pensions.

   Other Syriza deputies showed their displeasure with the new measures which they believe will plunge the country back into recession and push unemployment - already at a staggering 25 per cent - to even higher levels. A total of 32 Syriza MPs - including former Greek finance minister, Yanis Varoufakis - voted against the bailout measures, while a further six abstained.

   Greece's creditors - the European Union, the European Central Bank and the International Monetary Fund - demanded that the Greek parliament approve the bailout measures before work began on preparing the country's third €86 billion ($128 billion) bailout.

   Tsipras did not conceal his disagreement with the measures, saying that they would "not benefit the Greek economy". But he argued that they were the only alternative to either a disorderly default by Greece, or its temporary exile from the euro zone.

   "I was blackmailed, there were no good options and I chose the least bad, the MPs should recognise this and accept the same choice," he told Greek lawmakers before the vote.

Stinging critique

For his part, Varoufakis published a singing critique of the deal, arguing that the Syriza-led government was being forced to "accept the lie that it, and not the asphyxiation tactics of the creditors, caused the sharp economic deterioration of the past six months - the victim is being asked to take the blame on behalf of the villain."

   Many economists fear that the latest austerity measures will exacerbate country's long-running economic crisis and result in a generation of Greek workers being pushed out of the jobs market forever.

   They point out that Greece's share of long-term unemployment is the worst in Europe, with figures showing that almost three-quarters of the unemployed in 2014 had been out work for more than a year.

   Economists argue that long-term unemployment is particularly dangerous because workers lose their skills, and find it much harder to re-enter the jobs market.

   What's more, they believe the latest budget cuts is likely to keep Greece trapped in a never-ending cycle of austerity and recession, which has seen the country shrink by around 25 per cent since 2009.

   However, Greece had little choice but to accept the terms of the bailout in order to keep its banks from collapsing.

Short-term funding

   The Greek parliament's move to adopt the bailout measures should clear the way for the country to receive €7 billion in short-term funding, which will allow Athens to meet a €3.5 billion bond repayment due to be made to the European Central Bank on Monday.

   If Greece had defaulted on this payment, the ECB would probably have moved to withdraw the emergency loans on which the Greek banks are heavily reliant.

   Indeed, now that the bailout measures have been passed, Athens is hoping that the ECB may decide to lift the ceiling on emerging funding for the Greek banks, which are close to running out of cash.

   All the same, the ECB may decide to wait several days before approving an increase in emergency funding for Greek banks. Although the terms of Greece's latest bailout have now been passed by parliaments in Greece and France, the deal still needs the approval of lawmakers in Germany and Finland, both of which countries have taken a tough line with Athens.

Πηγή: afr.com