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28/09/2016

Greek parliament tables vote on bailout deal

Euro & Finance

Greek parliament tables vote on bailout deal

The national legislature, in Athens. [Wikimedia]

Greece’s parliament tabled a crucial vote on ratifying the text of a third international bailout agreement between Athens and its creditors late Tuesday (11 August).

The text of the deal, running to about 400 pages, was published online after Greek Prime Minister Alexis Tsipras called for MPs to vote on the deal on Thursday (13 August), although the Hellenic Parliament website did not specify when examination of the text would start.

The tabling of the vote came after Greek government and European Commission said Tuesday that they had reached the outline of a rescue package worth 85 billion euros ($94 billion) to save its stricken economy from collapse.

The bailout would be in exchange for Greece imposing fiscal and other policy measures including a gas market overhaul, the removal of most early retirement schemes, the elimination of fuel price benefits for farmers, and an increase in some taxes.

Greece and its creditors — the EU, the European Central Bank, and the International Monetary Fund — are under pressure to finalise the deal by August 20 when Athens must repay some 3.4 billion euros to the ECB.

The European Commission said Athens and its creditors had reached a technical agreement “in principle” on a bailout — the third for the debt-crippled country since 2010 — after marathon talks stretching into the early hours.

“What we don’t have is a political agreement,” said Commission spokeswoman Annika Breidthardt, hours after Athens suggested the deal was all but done.

The draft agreement comes after months of acrimonious negotiations between the creditors and Greece’s radical-left government, which came to power in January promising an end to years of painful austerity demanded in exchange for the cash.

Sigh of relief

Investors reacted with relief to news of the outline deal, with shares in Athens closing 2.14% higher after three straight days of gains.

But both sides said details remained to be hammered out, and an EU source stressed it was still not certain that the deal would be finalised by August 20 — leaving open the possibility that Athens might need emergency funding to pay its ECB debt.

“We might need a few days’ bridging (funding),” the source said on condition of anonymity.

“In that case, we need all the member states” to approve such a loan, the source added, in a potential fresh headache for negotiators.

The technical agreement has yet to be officially endorsed at the top political level, with eurozone finance ministers likely to meet at the weekend.

Finnish Finance Minister Alexander Stubb — one of the hardliners on the deal — stressed there was more work to be done, telling reporters: “Agreement is a big word.”

Despite the details still to be thrashed out, a Greek government source said Tsipras had nonetheless pushed ahead Tuesday evening and requested an emergency session of parliament for Thursday — with all lawmakers required to attend — for a crucial vote on ratifying the deal.

Tsipras is under pressure from many in his radical-left party Syriza who say the new accord will pile further austerity on a weakened economy and goes against the party’s campaign pledges. He suffered major parliamentary rebellions in two previous votes on the bailout.

The embattled prime minister has warned that he may be forced to call early elections if the mutiny continues.

Tough reforms

The Kathimerini newspaper said the Greek government would have to immediately implement 35 measures before the deal can kick in.

These include energy market deregulation, changes to shipping taxes, price cuts in generic drugs, a review of the social welfare system and phasing out early retirement, the daily said.

The talks saw Athens committing to a primary deficit of 0.25% of gross domestic product (GDP) in 2015, and a surplus in 2016, a finance ministry source said.

In 2016 the country will have to meet a primary budget surplus — the balance not including servicing debt — of 0.5%, followed by 1.75% in 2017 and 3.5% in 2018, the source added.

The government said in a statement that the creditors had agreed to a “mild adjustment” on fiscal targets that will help foster growth and save some 20 billion euros.

It said Greek banks — which were forced to shut down for three weeks as panicked customers withdrew billions of euros, fearing for the safety of their deposits — would immediately receive 10 billion euros from the package, and will be fully recapitalised by the end of the year.

The statement assured there was “absolutely no risk of a haircut on deposits”, apparently ruling out the possibility that authorities could raid people’s savings to pay off some of the country’s enormous debts.

European Council spokeswoman Breidthardt said the Economic and Financial Committee, which coordinates EU-wide economic policy, was making a conference call to all 28 member states to enable them “to take stock” of the accord.

Background

Greece and its international lenders reached an €85 billion bailout agreement on 11 August after nailing down the terms of new loans needed to save the country from financial ruin.

The deal, which came after 23 hours of talks that continued through the night, must still be adopted by Greece's parliament and by euro zone countries.

The currency bloc's finance ministers are expected to give their approval on Friday in time for Greece to make a crucial €3.2 billion debt repayment that falls due next week.

When creditors agreed in July to negotiate a deal aimed at keeping it afloat and in the euro zone, Greece committed to implementing major reforms, such as scrapping early retirement, by the end of October. Lenders demanded, for example, an increase in the retirement age to 67 from the nominal 62 that falls significantly depending on the number of years worked and family status.