Greece Hopes For Another Massive Bailout After Violent Street Protests

Tens of thousands of protesters clashed with police in the streets of Greece this weekend as the country's government agreed the toughest roster of austerity measures yet, ahead of a fresh round of bailout talks with eurozone finance ministers on Monday.

Around 18,000 people demonstrated in Athens against the measures and another 8,000 in Thessaloniki, according to the Greek police. In both cities violence broke out after a small number of anarchist protesters hurled rocks and Molotov cocktails at security forces, who responded by firing tear gas to disperse the crowds. The clashes came amid a three-day general strike led by Greece's largest union that brought much of the country to a halt, as government offices shut down, schools closed, and public transport didn't run.

The eleventh-hour legislation package, ultimately pushed through parliament with the backing of 153 out of 300 MPs in the early hours of Monday morning, will see the Greek pension system and tax system overhauled as well as a hike in VAT. Among the reforms is an increase in income tax for high earners, reduction of the national monthly pension to €384, and the phasing out of a benefit received by poor pensioners.

"We have an important opportunity before us for the country to break this vicious cycle, and enter a virtuous cycle," said Prime Minister Alex Tsipras, who was elected on an anti-austerity platform but was forced to do an about turn last year. At the upcoming eurozone meeting, finance ministers will discuss writing off some of Greece's debt — an option which would not have been considered without "root and branch reform" of the pension system, he said.

The measures are aimed collectively at making savings of €5.4 billion ($6.2 billion) — money intended to be used to meet debt repayments of €3.6 billion ($4.1 billion) due in July — as well as convincing creditors to release another desperately needed €86 billion ($98 billion) bailout promised last summer in exchange for the government implementing more austerity measures.

Greece is now in the sixth year of financial crisis and has already received more than €240 billion ($274 billion) in a series of bailouts from international creditors including the European Union (EU) and International Monetary Fund.

The country's woes began in 2009 when, a year after Wall Street imploded, it was revealed that the government had been understating Greece's deficit for years.

Last summer the government pushed through a series of austerity measures including expanding property taxes, raising retirement age, and reducing pensions. However, most of the money, both borrowed and saved, has so far gone to servicing debts rather than revitalizing the country's beleaguered economy.

As a result unemployment in Greece stands at 25.6 percent, and the economy has shrunk by a quarter in five years. Meanwhile the country's debt load currently runs in at a whopping 180 percent of GDP, the highest rate in Europe.

Tsipras' far left Syriza party won power through promising to reverse austerity measures but the leader was backed into a corner last year. Though a referendum of the Greek people called on the government to reject the international creditors' bailout conditions, he ultimately accepted them after lenders refused to back down on their demand for cutbacks and Greece teetered on the brink of being forced out of the eurozone.

As Greece again reaches crisis point the question now is whether the latest round of cutbacks are enough to convince lenders to hand out another round of cash and whether the government can weather the storm of mounting public anger.

While the European Commission has said that the negotiations for the next bailout are "99 percent of the way there," Greece's other creditor, the International Monetary Fund (IMF), has demanded the country's government agree a contingency plan of yet more austerity measures to raise money should it fail to reach an agreed budget surplus of 3.5 percent by 2018. The IMF believes this target will not be met as things stand as the current austerity measures will produce an excess of only 1.5 percent, according to its calculations.

However, while the IMF is taking a more stringent position on conditions under which it will release more money to Greece it has also been more willing to talk about writing off some of the country's debt — an option which has been fiercely opposed by European lenders, particularly Germany.

Monday's negotiations will be a second attempt at reaching an agreement on all these competing interests after previous talks in April broke down over a failure to agree on contingency measures.

However, with Greece again in a desperate situation the country may have little other choice than to agree. While the government has raised enough money to service pensions and public service wages for now, that money will likely only last a couple more months. Coupled with more debt repayments round the corner, without another bailout, default and a forced exit from the eurozone will again be looming large.

In a sign of more austerity to come, a bill that would increase taxes on a wide-range of products including tobacco, beer, and internet services is reportedly already being tabled with an eye to passing it next month.

Last week Greek Finance Minister Euclid Tsakalotos called on the eurozone to accept the government's latest package of austerity measures and said that if the talks were not successful Greece risked becoming a "failed state" that would cause broader damage to the EU.

However, even if an agreement is reached in Brussels on Monday, it must still get the approval of the Greek parliament before the next eurozone meeting on May 24. That may prove even more difficult for the government than reaching a deal with lenders. Syriza and its coalition partner ANEL — a rightwing party whose only common ground with the main ruling party is opposition to budget cuts — together hold just a 12 seat majority in parliament, and a deal including further austerity measures may well face resistance from a significant faction of dissenting MPs inside the government.

Greece's main opposition party, New Democracy, currently leads in the polls by around three to six points and in a worse case scenario failure to pass the measures may result in more street protests, a snap election, and negotiations back at square one.

Follow Harriet Salem on Twitter: @HarrietSalem