Tspiras tested by cuts plan to avert Greek default

THE Greek government has defended the billions of euros worth of “harsh” new budget savings it has offered in talks with creditors, as some of the governing party’s own parliamentarians attacked them.

Vote on proposed cuts will strain Greece's Prime Minister Alexis Tsipras' ruling coalition. Picture: AP

Greece has proposed measures worth €8 billion (£5.6bn) including increases to company and consumer taxes, to persuade its bailout creditors to release new loans it needs to avoid defaulting on its debts next week.

A decision is expected this week as eurozone finance ministers are to meet this evening, followed by a European Union summit tomorrow and Friday.

Greece needs a decision before 30 June, when its bailout expires and it faces a €1.6bn (£1.1bn) loan repayment to the International Monetary Fund (IMF).

Prime minister Alexis Tsipras’ leftwing Syriza party won elections in January on a promise to repeal the harsh budget cuts and tax increases that previous governments had imposed since 2010 in return for bailout loans.

Mr Tsipras said such measures focused too closely on healing public finances while worsening the economic plight of Greeks.

But with creditors withholding €7.2bn (£5.1bn) of rescue loans and Greece’s state coffers running dry, Mr Tsipras has been forced to backtrack.

A debt default could result in much greater economic pain for Greece – a potential run on the banks and even an exit from the euro currency union.

Yesterday, Mr Tsipras’ government found it had some explaining to do to its supporters.

“There is full comprehension that there are measures in the proposal that are harsh, and that under different circumstances, if it was up to us there was no way we would have taken,” spokesman Gabriel Sakellaridis said.

He said the measures targeted those on higher incomes. But some party figures were unswayed. Syriza MP Dimitris Kodelas said: “The deal toward which we are moving has nothing to do with our programme.”

And fellow MP Eleni Sotiriou said: “The responsibility for the political developments regarding the submission of such measures will lie with those who made these choices.”

Labour minister Panos Skourletis insisted the proposal, if accepted by creditors, was good for Greece and for workers. The deal is likely to have enough parliamentary votes to pass, with opposition support. But significant losses from the governing coalition of Syriza and its partner, a small nationalist party, could lead to early elections.

“Each person will assume their own responsibilities” in a vote, Mr Sakellaridis said.

The IMF sounded less optimistic yesterday, with its head, Christine Lagarde, describing the Greek proposals as “still short of everything that we expected”.