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Greek parliament approves bailout

Euro & Finance

Greek parliament approves bailout

Riots in Athens, 15 July.

[Mega TV/YouTube]

Greece’s parliament passed sweeping austerity measures demanded by lenders to open talks on a new bailout package early Thursday (16 July), but dozens of hardliners in the ruling Syriza party deserted Prime Minister Alexis Tsipras.

The package was approved after midnight, with 229 votes in the 300-seat chamber. There were 64 votes against it, and six abstentions. But Tsipras required the support of pro-European opposition parties to push the measure through, leaving the future of his government in question.

Tsipras said there was no alternative to the package, which he acknowledged would cause hardship, but he stood by the decision. “I am the last person to shirk this responsibility,” he told parliament.

Government spokesman Gabriel Sakellaridis acknowledged the vote laid bare a split in Syriza, but he said the government’s priority was to secure the bailout, suggesting that there would be no immediate move towards new elections.

In exchange for funding worth up to €86 billion, Greece has accepted reforms including significant pension adjustments, increases to value added taxes, an overhaul of its collective bargaining system, measures to liberalise its economy and tight limits on public spending.

It has also agreed to sequester €50 billion of public assets in a special privatisation fund to act as collateral on the deal.

The measures were branded “social genocide” by the leftist speaker of parliament Zoi Constantopoulou, and there were violent clashes between protestors and police outside parliament as the debate went on before the vote.

Among the 38 Syriza rebels was former Finance Minister Yanis Varoufakis, who was sacked by Tsipras last week and who denounced the bailout deal as “a new Versailles Treaty” – the agreement that demanded unaffordable reparations from Germany after its defeat in World War One.

Energy Minister Panagiotis Lafazanis and Deputy Labour Minister Dimitris Stratoulis also voted against the package.

Amid speculation that both ministers could lose their jobs in a reshuffle, possibly as early as Thursday, Lafazanis said he remained loyal to the government but was ready to offer his resignation, joining Deputy Finance Minister Nadia Valavani, who stepped down earlier on Wednesday.

‘I don’t know if I did the right thing’

“We support Syriza in government and we support the Prime Minister. We don’t support the bailout,” he said after the vote.

Current Greek Finance Minister Euclid Tsakalotos said during Wednesday’s parliamentary debate that his decision to back the bailout terms was something that “will burden me my whole life”.

“I don’t know if we did the right thing. I do know we did something we felt we had no choice over,” he said.

Elected in January on an anti-austerity platform, Tsipras made an about-turn following gruelling all-night negotiations in Brussels on Monday, giving in to lenders’ demands for immediate reforms to prevent a chaotic exit from the single currency.

Speaking in parliament before the vote, Tsipras made clear he was supporting the package against his will but there was no alternative if Greece was to avoid financial collapse.

“I acknowledge the fiscal measures are harsh, that they won’t benefit the Greek economy, but I’m forced to accept them,” he said as he made a final appeal for support.

‘A new Versailles treaty’

With Greek parliamentary approval secured, the way has been cleared for other national parliaments to approve the start of bailout talks and for the release of funding to allow Greek banks to re-open, more than two weeks after capital controls were imposed to prevent them from collapsing.

Eurozone finance ministers are due to hold a conference call on Thursday at 10 AM (0800 GMT) to discuss the vote.

With Greece facing an urgent deadline on Monday (20 July), when a €3.5 billion payment to the European Central Bank is due, EU officials raced to agree a bridge financing accord that would enable Athens to avoid defaulting on the loan.

The European Central Bank has been keeping Greek banks afloat with emergency liquidity, but it could be forced to cut off that aid if Greece misses Monday’s debt repayment.

Greece’s creditors estimate Athens needs €12 billion to get through mid-August – including €4.2 billion it must pay the ECB on Monday to keep its crippled banks alive – but some countries are resisting contributing to any bridge financing.

Despite strong objections from Britain and the Czech Republic – EU countries that do not use the euro – a €7 billion loan is expected to be extended to Greece from the European Financial Stability Mechanism (EFSM), an EU-wide fund not intended for eurozone funding needs.

Commission Vice President for the euro Valdis Dombrovskis said yesterday that the EU executive was looking at ways to accommodate the concerns of non-eurozone countries by providing them some sort of guarantees or collateral so that they would not risk losing money from the EFSM.

>>Read: Dombrovskis: EFSM is ‘best possible’ solution for Greece

In addition, the Commission announced that it would allow the disbursement of €35 of EU funds with preferential conditions (€20 billion from the European Structural and Investment Funds as well as €15 billion from Agricultural Funds). [Read more]

Given the hurdles facing the agreement, doubts have surfaced about how long it could hold together, with one senior European Union official saying it had a “20-, maybe 30-percent chance of success”.

After its deepest crisis since World War Two, the Greek economy has lost more than a quarter of its output and more than one in four of its workforce is unemployed. It is unclear how it can sustain the burden of one of the most far-reaching austerity programmes ever imposed on a eurozone country.

A study by the International Monetary Fund issued on Tuesday called for much more debt relief than Greece’s eurozone creditors, particularly Germany, have been prepared to accept so far.

>>Read: Leaked IMF report says Greece needs much more help

Berlin, which along with the other creditors knew about the IMF study before agreeing to new bailout talks, may wince at providing huge debt relief to a country it scarcely trusts to honour its promises.

But Germany insists on having the IMF in the negotiations to help keep Greece in line. It may countenance extending repayment periods for Greek debt but has said it will not accept a writedown, with the finance ministry insisting it could not accept “a debt haircut via the backdoor”.

‘Europe’s bankrupt child’

The European Commission published its own assessment of Greece’s debt burden on Wednesday that also offered the prospect of debt relief. While ruling out any write-offs, the Commission said debt reprofiling was possible, as long as Greece implemented the reforms to which it has agreed.

Washington has stepped up pressure for a deal between the euro zone and NATO member Greece. US Treasury Secretary Jack Lew is making a short-notice trip to Frankfurt, Berlin and Paris this week to press for a quick agreement.

Although the bailout package is much tougher than the Greek people could have imagined when they resoundingly rejected a previous offer from the creditors in a referendum on 5 July, most want to keep the euro.

With banks shut and the threat of a calamitous exit from the currency bloc hovering over the country if it cannot conclude a deal, many Greeks see the package as the lesser of two evils.

“We are Europe’s bankrupt child and as a child, Europe has been supporting us for five years and told us what we needed to do to get out of this situation,” said Yannis Theodosis, a 35-year-old civil engineer. “We did nothing and now we are paying the consequences.”

Civil servants held a strike on Wednesday, as did pharmacists, whose industry would be opened up under the reform package, in demonstrations that passed peacefully until a small group threw petrol bombs at police, who responded with tear gas and flash bombs.

Calm later returned but nearby streets were empty and garbage bins were still burning. About 30 people were detained, according to a police source.


Eurozone leaders reached an agreement on a programme to save Greece from bankruptcy after 17-hour talks on 13 July.

>> Read: Eurozone reaches ‘laborious’ tentative deal on Greece

If approved, this will be the third rescue programme for Greece in five years. It will be managed by the European Stability Mechanism (ESM), the eurozone permanent crisis resolution fund that was initially set up five years ago in an effort to save Athens from bankruptcy.

Here is a look at what Greece must do:

  • Request continued support from the International Monetary Fund after its current IMF program expires in early 2016.
  • Streamline consumer tax and broaden the tax base to increase revenue. Laws on this are due by Wednesday.
  • Multiple reforms to the pension system to make it financially viable. Initial reforms are due by Wednesday, others by October.
  • Safeguard the independence of the country's statistics agency.
  • Introduce laws by Wednesday that would ensure "quasi-automatic spending cuts" if the government misses its budget surplus targets.
  • Overhaul the civil justice system by July 22 to make it more efficient and reduce costs.
  • Carry out product market reforms that include allowing stores to open on Sundays, broadening sales periods, opening up pharmacy ownership, reforming the bakeries and milk market and opening up closed and protected professions, including ferry transport.
  • Privatize the electricity transmission network operator unless alternative measures with the same effect can be found.
  • Overhaul the labour market. This includes reviewing collective bargaining, industrial action and collective dismissal regulations.
  • Tackle banks' non-performing loans and strengthen bank governance.
  • Significantly increase the privatization program, transferring 50 billion euros worth of Greek assets to an independent fund, based in Greece, to carry out the privatizations.
  • Modernize, strengthen and reduce the costs of Greek administration, with a first proposal to be provided by 20 July.
  • Allow members of the three institutions overseeing Greece’s reforms - the European Central Bank, IMF and European Commission, previously known as the 'troika" - to return to Athens. The government must consult with the institutions on all relevant draft legislation before submitting it to public consultation or to parliament.
  • Re-examine, with a view to amend, legislation passed in the last six months that is deemed to have backtracked on previous bailout commitments.

Further Reading