Embattled Alexis Tsipras faces domestic revolt over plans to implement 'harsh' austerity blitz

By Mehreen Khan 23 June 2015

Leftist party is forced to defend its plans from extreme left and right-wing critics amid prospect of a government collapse over concessions to creditors

Greece's reform proposals are cantered around a series of tax hikes Photo: Bloomberg

Embattled Greek prime minister Alexis Tsipras is facing a revolt within his radical Left party over austerity measures the country must approve to secure its future in the euro.

Following a late-night emergency summit in Brussels on Monday, Athens laid out plans to carry out a series of economic reforms worth €8bn over the next two years. They included a rise in VAT for restaurants, abolition of tax exemptions for Greek islands and plans to end early retirement in the country.

The Greeks were told the measures were a good basis for talks, which will continue with finance minsters in Brussels on Wednesday.

But the measures are likely to prove a hard sell to Mr Tsipras's parliamentarians, as they cross a number of the "red lines" that have led to a five-month impasse in negotiations.

Syriza MP Yannis Michelogiannakis called the proposals a "tombstone" around the country's neck.

"How can you cut a deal that will increase suicides and make people poorer?" he told Greek television.

The anti-austerity government admitted its plight had forced it into a position to carry out “harsh” proposals.

"There is full comprehension that there are measures in the proposal that are harsh, and they are measures that, under different circumstances, if it was up to us there was no way we would have taken," said government spokesman Gabriel Sakellaridis.

PM Tsipras arrives at his office at Maximos Mansion in Athens from Brusslels on Tuesday

Leftist parliamentarian Costas Lapavitsas said the tax blitz was a "recessionary measure" that would hurt economic growth at a time when the country had fallen back into recession.

Any rescue deal will have to be ratified by the Greek parliament if an agreement is struck in the coming weeks. But with only a 12-seat majority in parliament, Mr Tsipras's five-month government faces a collapse should he fail to secure a majority.

Mr Lapavitsas said he would "wait and see" before deciding how to vote, adding that he expected lenders to continue demanding more from the government ahead of a European leaders' summit on Thursday.

Greece's planned pension reforms still fall short of the 1pc target demanded by lenders, in particular the International Monetary Fund.

The IMF has yet to deliver its verdict on events, despite bullishness from the European Commission president Jean-Claude Juncker that a deal had to be done before the end of the week.

"I expect new demands," said Mr Lapavitsas.

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The country's junior coalition partner, nationalists ANEL, vowed to vote against any deal which would reverse tax privileges for the country's Aegean islands.

Leader of ANEL and Greek defence minister Panos Kammenos said the issue was a "red line" for his party and he would vote against it “even if the government falls”.

Greek pensioners took to the streets of Athens on Tuesday to protest against the reforms, which would see the retirement age rise to 67 by 2025, and contributions rise by 3.9pc from next year.

The dissent came as the European Central Bank was forced to provide another injection of emergency cash into Greece's creaking banks. This "emergency liquidity assistance" is now being reviewed on a daily, rather than weekly, basis, reflecting fears that Greece's financial system is on the brink of insolvency.

Tentative hopes of an agreement have stemmed deposit flow to less than €400m. Greek markets also continued their second consecutive day of rises, soaring by 6pc on Tuesday.

Embattled Alexis Tsipras faces domestic revolt over plans to implement 'harsh' austerity blitz - Telegraph