Greece approves Christmas bonus as France challenges German veto

Sakis Mitrolidis, AFP | Greek Prime Minister Alexis Tsipras has seen many of his reforms shot down by the country's eurozone creditors amid a stringent austerity regime.

Greece defied its creditors and approved plans on Thursday to give its battered pensioners a one-off Christmas bonus after France’s president said it was wrong to prevent the country from taking “sovereign decisions”.


A group of eurozone finance ministers on Wednesday said they were suspending a deal clinched earlier this month to offer Greece short-term debt relief after Prime Minister Alexis Tsipras unexpectedly said he would grant low-income pensioners a pre-Christmas payoff.

Tsipras's move angered officials in Germany and several other member states, but French President François Hollande and his finance minister came to Tsipras's defence on Thursday in a sign of European divisions over how to handle Greece.

Tsipras, a leftist firebrand who swept to power in early 2015, promising to do away with austerity only to be forced into accepting another bailout months later, insisted the one-off fiscal break would not derail the economic targets outlined in Greece's bailout plan.

"I want to stress that these are measures that do not jeopardise the programme nor the primary surplus for 2016 and have no fiscal impact on 2017 and 2018," he told a news conference in Brussels.

Is Greek humbling killing European dream?

Greece, Tsipras said, was meeting its bailout commitments “to the letter”. He was due to meet German Chancellor Angela Merkel on Friday.

Merkel said she anticipated there would be a discussion about the issue, but said she did not intend to get involved in negotiations on the Greek package.

As shadowboxing over dealing with Greece's conundrum deepened, lawmakers in Athens backed the decision to allocate 617 million euros ($642.54 million) – a surplus from savings – in a bonus to pensioners.

"[Greek] people have to see that sacrifices of now six, seven years are at last starting to pay off," Greek Finance Minister Euclid Tsakalotos said.

About 5,000 pensioners, jaded by those sacrifices and almost a dozen pension cuts that have pushed almost half of the country's elderly into poverty, marched peacefully through the streets of Athens on Thursday night.

"We came here to send a message. No more!" protesting pensioner Efstratios Bozos told Reuters. "Our pensions have become restaurant tips."

Arriving at the Brussels summit, France's Hollande said it was wrong to prevent Greece from taking "sovereign decisions" and suggested that eurozone ministers had not granted Athens sufficient debt relief.

"It is out of the question to ask for further additional efforts from Greece or prevent them from taking a number of sovereign measures that respect [its] commitments," Hollande said.

‘Tame pussycat’

French Finance Minister Michel Sapin, speaking in Paris, expressed understanding for Tsipras's decision to spend 617 million euros on pensioners.

Greece unveiled the pensioner payout and a separate decision to keep lower value-added tax on some islands without consulting euro zone governments, which now own most of Greece's public debt, although the bailout agreement says such a consultation is a must.

The consultation would have given lenders time to assess the fiscal and economic consequences of the two Greek decisions for the bailout reform programme and targets. Germany has asked the institutions to check if the Greek decisions are in line with bailout obligations.

Debt relief and Germany's economic miracle

The differences come amid a deep rift between Athens, its European partners and the International Monetary Fund over the reforms needed to get the Greek economy, in recession since 2009, back on track.

Under the latest bailout agreement, Greece has been forced to accept more of the punishing austerity programme that its government blames for turning a recession into a six-year depression that wiped out 25 percent of the country’s economy, pushed millions into poverty and dramatically increased the debt-load it was supposed to reduce.

The IMF – whose own watchdog this year gave a scathing assessment of its failings in dealing with Greece’s debt crisis – sees the eurozone's economic targets for Greece as overly ambitious and the assumptions about reform implementation too optimistic.

The IMF is also at odds with Germany and some other northern European countries over granting Greece more significant debt relief. Berlin wants to retain leverage over Athens and is reluctant to grant it favours that could anger conservative allies of Merkel before a federal election in the autumn.

The IMF, which participated in the first two bailouts for Greece, has refused to inject funds this time amid the standoff over economic assumptions and debt relief – but Athens has criticised the institution for failing to push decisively for debt relief.

"I'm hopeful that we will be able to reach an agreement," Tsakalotos said. "I am very disappointed with the IMF, which said it would be a roaring lion in forcing the Europeans to provide more in debt relief, but has turned out to be a rather tame pussycat instead."


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