Greece to adopt fresh cuts, tax hikes for bailout cash

ATHENS — Greece on Sunday was set to adopt fresh cuts and tax hikes ahead of a Eurogroup meeting, expected to unlock desperately-needed bailout funds for the debt-ridden country.

After waves of protests over a string of unpopular reforms, lawmakers from the ruling leftist party are to approve late Sunday a bill of over 7,000 pages that raises the sales tax cap and introduces a mechanism to further slash spending in case of budget overruns.

The contingency mechanism in the new legislation — labelled "the cutter" by Greek media — is designed to cut state spending if the country fails to meet fiscal targets, is of chief interest to Greece's international creditors. 

Greece has pledged under its latest EU bailout to bring its primary budget surplus, which excludes debt payments, to 3.5 per cent of its gross domestic product by 2018.

Should Athens fail to reach its fiscal targets, it must resort to the new mechanism to save up to two per cent of output in a fiscal year.

'It's raining taxes'

People on all sides of Greece's political divide have criticised the sweeping reforms, the latest in a string in recent years.

Earlier this month, tens of thousands took to the streets to protest against an equally unpopular pension reform and tax hike. 

Fresh demonstrations are planned for Sunday afternoon, while all public transport has been at a standstill all weekend due to a strike called by the main unions.

The country's main business owners on Friday meanwhile warned the latest measures will "dampen" investor interest in Greece and its chances for a recovery.

Greek newspapers on Sunday voiced criticism over the fact that the new taxes and cuts, which also include a maximum VAT hike from 23 to 24 per cent, don't come with a promise from the country's international creditors of debt relief.

"It's raining taxes, with the future of debt uncertain," read the headline of Kathimerini newspaper's top story.

Greece and its European creditors are locked in talks on how to reduce the country's debt burden, which the International Monetary Fund (IMF) said must happen if it is to contribute any more of its own funds.

The IMF said on Thursday that Greece would need a lengthy period free from debt payments to achieve sustainable finances if the European Union does not agree to cutting the debt up front.

"It is possible to restore debt sustainability without upfront haircuts, although this would involve providing very concessional loan terms including long grace and maturity periods and very low interest rates," IMF spokesman Gerry Rice told reporters.