EU breathes sigh of relief, but it’s not over yet

THE vote in favour of a second round of austerity measures in Greece was greeted with relief by the EU, but the process is far from over yet.

Eurozone finance ministers will gather in Brussels on Sunday, when they hope to plan the disbursement of the next loan tranche to Greece.

Even with yesterday’s approval, there remains a risk that lawmakers may reject detailed austerity bills in votes today on the implementation of different elements of the plan, such as tax rises and the sale of state assets.

If so, the meeting would take on a much more urgent task of trying to prevent contagion to the other crisis countries, including Ireland.

The fact that yesterday’s vote was just the start of a long journey for the Greek economy was underlined by the presidents of the European Commission, Council and Parliament.

It was described as “an important step forward along the necessary path of fiscal reform” in a joint statement from Commission president Jose Manuel Barroso and Council president Herman Van Rompuy.

Parliament president Jerzy Buzek noted that serious reforms are needed in particular in the labour market, on retirement ages and privatisations.

The changes to the massive cuts already achieved in Greece will mean a further €70 billion in extra taxes and state spending and €30bn to be raised through the sale of state assets.

The assets that include telecoms, transport and electricity have been estimated to be worth about €50bn but because they have to be sold off quickly it is thought they will have difficulty raising even €30bn.

The other contribution to getting down Greek debt and deficit is to have the private sector — mainly banks — contribute also. This move, at Germany’s insistence, is expected to cut €30bn off the bottom line.

While credit rating agencies warned that any form of coercion on the private sector would be declared as a default for Greece, work has been ongoing for the past fortnight with the banking sector and the rating agencies to achieve it in such a way that it would not be interpreted as the country being declared bankrupt.