Greece will implement additional austerity measures agreed with its official creditors on condition of further debt relief that will enable the country to be included in the ECB’s bond buying scheme, Prime Minister Alexis Tsipras said on Sunday.
Athens struck a deal with its international creditors at Friday’s meeting of euro zone finance ministers in Malta on key elements of a reform package that could unlock bailout funds for the country to help it repay maturing debt in July.
“Medium-term debt relief measures, able to include us in (the ECB’s) quantitative easing, and a fiscal path that will not be unattainable, is the condition for us to implement the measures we decided,” Tsipras told his leftist Syriza party’s central committee.
Athens agreed to take measures that will cut government spending on pensions by 1.0 percent of economic output in 2019, a year after its current 86 billion euro bailout program expires.
It also committed to tax reforms in 2020 to generate additional revenue equal to another 1 percent of gross domestic product, mainly by lowering the current income tax exemption threshold.
To make the deal more palatable for Greece the lenders agreed that if budget savings targets are exceeded, Athens will be allowed to implement relief measures to boost the economy.
“What was decided in Malta … renders the horizon for the country’s exit from supervision visible,” Tsipras said, in a bid to drum up support for the difficult measures his lawmakers will need to legislate.
“After Malta, the road opens for specifying measures on debt relief. This will send a clear message that the crisis is behind us,” he said.
Greece is aiming for a budget surplus before debt servicing outlays of 3.5 percent of GDP in 2018, a level it will have to maintain thereafter over the “medium term”.There is no agreement yet on what exactly “medium term” means as euro zone ministers did not discuss this during Friday’s meeting.
Tsipras said the compromise reached in Malta would enable his government to also legislate relief measures to tackle poverty, unemployment and build a “social state”.
“I am certain that the difficult decisions we took … are ones that in a few years, when we look back at the crucial dilemmas we faced, we will be sure we did the right thing,” Tsipras said.
(Writing by George Georgiopoulos; Editing by Stephen Powell)