Greek Prime Minister Alexis Tsipras contained a rebellion in his left-wing Syriza party to win parliamentary approval on Thursday (22 July) for a second package of reforms required to start talks on a financial rescue deal.
The bill passed by a resounding 230 votes out of the 298 members of parliament present, after a marathon debate stretching into the early hours that nonetheless exposed deep divisions in the governing Syriza.
The legislation covered the transposition of an EU directive for dealing with failed banks and speeding up the justice system – two more conditions set by the eurozone and IMF to open negotiations on an €86 billion rescue loan.
While the premier trimmed the rebellion from 39 ‘no’ votes and abstentions last week to 36 on Thursday, in both cases he was forced to rely on opposition parties to get the legislation passed.
36 Syriza deputies – or almost a quarter of the party’s 149 lawmakers – voted against the overall bill, or abstained.
In Brussels, European Economic and Monetary Affairs Commissioner Pierre Moscovici said creditor institutions were seeking to conclude talks with Greece on a third bailout in the second half of August.
The government has said it hopes negotiations on the bailout deal can start this week and be wrapped up by 20 August.
Thursday’s vote was seen as a key test of Tsipras’ authority after he was forced to reshuffle his cabinet following a mutiny by nearly a fifth of his MPs in a separate vote on the first tranche of economic reforms demanded by Athens’ creditors.
The bill adopts into Greek law new EU rules on dealing with failed banks, imposing losses on shareholders and creditors of ailing lenders before any taxpayers’ money can be tapped in. It also toughens law on foreclosures, though Tsipras pledged his government would not allow banks to seize primary residences.
The tough reform package sparked five hours of fiery debate on Wednesday night, with weary lawmakers clashing on everything from Marxism to submarines as dawn neared, and the speaker of parliament comparing the bailout deal to “a coup”.
In a passionate speech to the chamber, Tsipras insisted the deal was the result of a “difficult compromise” with Greece’s paymasters – the European Union, European Central Bank and International Monetary Fund – necessary to prevent Greece from tumbling out of the eurozone.
“We made tough choices, and I personally made difficult, responsible choices. Today we must all redefine the possibilities ahead of us given the new circumstances,” Tsipras said in an appeal to parliament to back the reforms.
“We have been forced to make a difficult compromise under urgent conditions. We were at the limits of our economy and our banking system, and at the limits of Europe – where conservative forces, obsessed with austerity, dominate,” he added.
Crucially, the bill also includes the reform of the judicial system, which is similar to a law that Syriza had opposed before it came to power, and which hardline Left Platform lawmakers particularly oppose.
Greece’s creditors say the measure is needed to speed up court proceedings and reduce their cost. Greek leftists say it violates rights to a fair hearing and could favour creditors and hurt workers in bankruptcy cases.
Hardline Left Platform lawmakers from Syriza, who opposed last week’s bill, rejected this week’s law and complained about the length of the bill, which covered more than 900 pages.
Tsipras has publicly said he disagrees with measures demanded by Greece’s eurozone peers and the IMF for talks to proceed on a third bailout to save the country from bankruptcy.
But after he made a U-turn by accepting a deal at the 11th hour to keep his country in the euro, he told party hardliners to face reality and back the package.
Tsipras also told party rebels that Syriza’s presence in government had averted the worse for the Greek people. “The left’s presence in government is a bastion for the defence of the interests of the people,” he said. “We will not be cowards. We will fight the battles we face with determination.”
But he also warned that “the painful path does not stop here, unfortunately”.
Ahead of the vote, Vassiliki Georgiadis, a political science professor at Athens’ Panteion University, said it would be “difficult” for Tsipras’s Syriza-led coalition to remain in power if he is forced to rely on opposition MPs to get laws passed.
She said the split within Syriza was between hard-left MPs – “some of whom have spoken of a Greek exit from the eurozone as the only solution” – and those more sympathetic to Tsipras’s arguments.
Together with his coalition partners from the right-wing nationalist Independent Greeks, Tsipras has 162 seats in the 300-seat parliament. Last week’s rebellion cut his support to just 123 votes and government officials have said elections are likely in September or October once the package is agreed.
“We might go to elections, when this is needed,” government spokeswoman Olga Gerovasili earlier told local radio, adding that it would not be helpful now as the country prepares to negotiate the new bailout deal. “We are trying to bring the situation back to some sort of normality,” she said.
Gerovassili previously said the administration had “no intention” of calling early polls, and Tsipras told parliament on Thursday that he would keep fighting for Greece’s best interests, adding he would not “voluntarily abandon” the job.
In the first signs of a return to normal, Greek banks reopened on Monday and Athens paid debts due to the European Central Bank and International Monetary Fund. The ECB increased its emergency funding by 900 million euros, the same amount it provided last week.
On Tuesday, Standard & Poor’s upgraded Greece’s sovereign credit rating by two notches.
But fresh austerity measures are hard to accept in a country whose economy has contracted by a quarter during five years of crisis and where unemployment is more than 25 percent. Rallies called by the main public sector union ADEDY, the Communist-affiliated party PAME and anti-establishment groups drew several thousand people in front of parliament.
Apart from some minor incidents, there was no repeat of the violence seen at a rally last week, when masked youths hurled petrol bombs at police as lawmakers were debating the first bailout bill.
Mistrust still deep in Germany
With mistrust among eurozone countries still high despite the deal struck last week to launch bailout talks, a senior German lawmaker in Chancellor Angela Merkel’s conservative party warned Greece it would not get aid if it backtracked on reforms.
“We are keeping a close eye on whether Athens not only adopts the reforms but also implements them,” Gunther Krichbaum, chairman of the German parliament’s Europe committee, told Bild. “Greece must fulfil the conditions, otherwise the money cannot flow.”
The bill does not include pension reforms curbing early retirement or increasing tax rates paid by farmers – a step strongly opposed by the conservative New Democracy party and many Syriza deputies.
The fact that these measures were not included in the bill aroused some media speculation that Athens was backtracking on reform commitments. Finance Minister Euclid Tsakalotos told lawmakers Greece had agreed with its lenders to deal with these issues during bailout talks.
Eurozone leaders reached an agreement on a programme to save Greece from bankruptcy after 17-hour talks on 13 July.
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.
- Make 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 22 July 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.
- Reexamine, with a view to amend, legislation passed in the last six months that is deemed to have backtracked on previous bailout commitments.
- 20 August: Bailout talks expected to conclude