The Greek government will put forward plans to root out tax evasion and overhaul the country’s labour laws in a bid to convince international creditors it should be granted a vital extension of its bail-out programme on Monday.
Athens is due to present a series of proposals to its international creditors formerly known as the Troika, in return for a four-month bail-out reprieve which will help avert bankruptcy in the stricken country.
They are likely to include measures to shrink the civil service and combat tax evasion, according to Greece’s minister of state, Nikos Pappas.
Creditors from the European Central Bank, International Monetary Fund and the European Commission will decide whether the proposals are sufficient to release the €7.2bn in financial aid that would allow the embattled country to complete the rest of its bail-out programme.
However, even if approved, the first tranches of the bail-out are not expected to be released to Athens before April, squeezing the country’s public finances and likely putting a hold on Syriza’s pre-election promises to raise the minimum wage and re-hire government workers.
The extension, which was agreed in principle at deadline day talks on Friday evening, will also need to be ratified by Greece’s 18 fellow eurozone member states, including the German parliament if Greece is to remain solvent.
A failure to extend it could see the country run out of money before the end of next month, as it faces repayments of over €1.5bn to the IMF in March.
Data from January showed tax revenues had collapsed, while Greece banks suffered deposit flight of more than €1bn a day at the end of last week.
Yanis Varoufakis, the country’s finance minister, said a failure to rubber stamp the proposals would mean the extension agreement would be “dead and buried.”
Eurozone finance ministers could convene an emergency meeting on Tuesday if the institution of lenders rejects the reforms.
The Syriza-led government also faces a domestic battle to convince voters they have not gone back on their pre-election promises to reflate the economy.
In a defiant address on Greek television over the weekend, Prime Minister Alexis Tsipras said his country would no longer be “asphyxiated” by austerity.
“Yesterday’s agreement with the Eurogroup cancels the commitments of the previous government for cuts to wages and pensions, for firings in the public sector, for VAT rises on food, medicine,” the prime minister said on Saturday.
“We averted plans by blind conservative powers, within and outside the country, to asphyxiate Greece on February 28,” he said.
But dissent in Syriza’s ranks emerged over the weekend.
Veteran Leftist politician and hero of the Greek resistance in the Second World War, Manolis Glezos said the government was “renaming fish as meat" in failing to throw out the existing bail-out programme.
“I apologise to the Greek people for participating in this illusion,” the 92-year-old Mr Glezos wrote on his blog.
However, Mr Tsipras still commands a 70pc-80pc approval rate among the Greek public, according to the latest polls.
A bail-out extension will still not secure Greece’s future in the monetary union.
Athens will likely require a third bail-out programme in June as it faces more than €6.7bn of bond redemptions to the ECB in July and August.
Progress on reaching a temporary reprieve could see the ECB resume its ordinary lending to Greek banks and alleviate the pressure on the country’s lenders.
The ECB banned the acceptance of Greek bonds as collateral for loans earlier this month, forcing banks to rely on more expensive emergency liquidity help which has been stretched to its limits over the past week.
At the current rate of deposit flight, Greek banks will have run out of money in less two months, according to JP Morgan.
The prospect of deposit flight means the option of capital controls cannot be ruled out, according to Deutsche Bank.
“The road ahead remains long, and it remains unclear how the current government can navigate between the commitments it has made to Europe with competing domestic political demands,” said George Saravelos at Deutsche Bank.
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