Greece Approves First Austerity Bill

After a week-long debate, the bill, which includes stricter pension rules, tax hikes and tougher fines for tax evasion, was passed on Friday by the majority of Greece’s 300 lawmakers.

Under the deal Greece struck with its international creditors, which foresees up to €86 billion ($97.6 billion) in fresh loans, the omnibus bill—so-called because it wraps a number of proposed reforms into one bill—will pave the way for the disbursement of the next €2 billion in bailout funds, The Wall Street Journal reported.

Despite the harsh austerity measures included in this set of proposed measures, the bill was supported by the country’s coalition government.

The ruling coalition, elected late September, is made up of the left-wing Syriza party and its junior coalition partner, the right-wing nationalist Independent Greeks. It holds a slim majority of 155 seats in the 300-seat legislature.

Greek Prime Minister Alexis Tsipras, first elected in January, dropped his ardent opposition to further austerity in July and agreed to a tough third bailout deal, a move seen as necessary to avoid a chaotic exit from the eurozone. He called snap elections in a successful bid to jettison doubters in his party, securing a comfortable win and a mandate to push through the deal.

Since returning to the premier’s seat, the 41-year-old leader has affirmed his commitment to the new bailout program, despite its tough austerity requirements.

The law includes a gradual increase of the retirement age and higher penalties for those granting early retirements. It also includes a tighter legal framework for tax evasion, changes in the legal framework for the settlement of tax arrears and foresees the facilitation of the gas market’s liberalization.

A second, more difficult, set of economic and financial overhauls is expected to be tabled and voted on in parliament by mid-November to unlock a €1 billion second tranche of funding.

This is expected to include more painful measures including increasing taxation for farmers, further pension reductions and arrangements for privatizations.

Last week, Greece’s Prime Minister Alexis Tsipras said the government aims to achieve a swift and successful conclusion of the first review of the country’s bailout program by the end of November. This will pave the way for the recapitalization of Greek banks to be concluded by the end of the year, before the deposit bail-in instrument becomes effective at the beginning of 2016.

By clearing these difficult hurdles in the next couple of months, the government hopes that it will be able to begin talks on Greece’s debt restructuring with its euro area partners.

Data released by the Finance Ministry earlier this week showed that Greece’s budget revenue fell 18% short of the mark in September, contributing to a widening deficit for the first nine months of the year.

In what could be a further blow to Greece’s tax collection efforts, Mr. Tsipras demanded Friday the resignation of the country’s top tax official, Katerina Savvaidou.

The call for Ms Savvaidou to step down came a day after she was charged with breach of duty by a prosecutor for attempting to defer tax collections from the country’s TV stations by a year, in violation of a law, a Greek government official said.

Ms. Savvaidou wasn’t immediately available for comment.