Earlier this afternoon, the Greek Parliament voted 155 to 138 in favour of a series of tax hikes to raise €14bn and public spending cuts of a further €14b over the next five years. If the austerity package had not been voted through it is highly unlikely it would have received the latest tranche of its €110bn loan from the IMF/European Union.
The total amount of Greek debt is €340bn so the latest tranche is simply to allow it to pay its existing bills and allow it to get back round the negotiating table to finalise the details of a second bailout of another €120bn.
The measures include taxes on lower income wage earners and a wider, nationwide emergency levy though it has not yet been passed into law. There will be a second vote held on Thursday to change a law for these measures to be implemented as well as make a decision on which public assets it will sell, expected to include public power and transportation companies.
While it does not make for good reading, Bryn Jones, fixed income director at Rathbone Unit Trust Management, summed up the thoughts of many investors and economists when he said: “The Greek on the street might not think this is a good outcome; however, this is what the financial markets need in the short term to maintain confidence that ultimately there will be a positive end-game.”
