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Greek Parliament Approves Bailout Terms

Greece’s parliament has approved a bill of tough reforms demanded by the country’s creditors in return for a new bailout.

The ruling radical Syriza party passed the bill thanks to support from pro-European opposition parties. Several government politicians, including former finance minister Yanis Varoufakis, voted against the measures. It came after Greek Prime Minister Alexis Tsipras made a final appeal to parliament for support of the tough package of bailout measures imposed by European partners this week. He told MPs there was no alternative, even though he disagreed with the measures.

Earlier, demonstrators clashed with police in front of parliament ahead of the key vote, in some of the most serious violence in over two years. Protesters threw dozens of petrol bombs with police responding with tear gas, sending hundreds of people fleeing in central Syntagma Square. Thousands of people took to the streets of Athens this afternoon in a series of otherwise peaceful marches during the day to protest against the new bailout deal that saved Greece from bankruptcy but will impose more reforms on a country already deep in crisis.

The ruling Syriza party, elected in January on an anti-austerity platform, has been deeply split by the bailout deal that Mr Tsipras was forced to accept after gruelling negotiations in Brussels this week. More than half of the party’s 201-member central committee, signed a statement rejecting the humiliating terms of the bailout, saying it was not compatible with the principles of the left.

“This proposal cannot be accepted by the people of Syriza,” they said. Mr Varoufakis denounced the bailout as a new Versailles Treaty. Deputy finance minister Nadia Valavani resigned and Energy Minister Panagiotis Lafazanis said he would not back the deal. “The choice between a bailout or catastrophe is a choice made in the face of terror,” Mr Lafazanis, who heads the far-leftflank of Syriza, told reporters. Even ministers supporting it could muster little enthusiasm for an accord which will impose a painful mix of tax hikes, public spending clamps and pension and labour reforms on the already severely weakened economy.

It’s a difficult deal, a deal for which only time will show if it is economically viable, Finance Minister Euclid Tsakalotos said during the debate. Mr Tsipras is expected to reshuffle his cabinet after the vote, replacing Mr Lafazanis and Deputy Labour Minister Dimitris Stratoulis, another bailout opponent, and possibly making other changes as well. A study by the International Monetary Fund issued yesterday called for much more debt relief than European countries, particularly Germany, have been prepared to countenance so far.

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 maturities for Greek debt but says it will not accept a writedown, with the finance ministry insisting it could not accept “a debt haircut via the backdoor”.

Given the hurdles facing the agreement, doubts have already surfaced about how long it can hold together, with one senior European Union official saying it had a 20%, maybe 30% chance of success. With Greece facing an urgent deadline on 20 July, when a €3.5bn payment to the European Central Bank is due, European Union officials were racing to agree a bridge financing accord that would enable Athens to avoid defaulting on the loan.

There were strong objections from both Britain and the Czech Republic – EU countries that do not use the euro – to proposals to provide a €7 billion loan from the European Financial Stability Mechanism (EFSM), an EU-wide fund not intended for eurozone funding needs. The European Commission published its own assessment of Greece’s debt burden today that also offered the prospect of debt relief. While also ruling out any write-offs, the commission said debt re-profiling was possible, as long as Greece implemented the reforms it has committed to.

British Prime Minister David Cameron joined calls to give Greece debt relief but ruled out contributing to the bailout. 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.

Civil servants held a strike today, as did pharmacists, whose industry would be opened up under the reform package. Anti-bailout groups staged protest marches, although street protests have been relatively muted so far. The latest deal was a major capitulation from Syriza, which stormed to power promising an end to austerity. Syriza’s junior coalition partner said it would vote only for certain clauses in the bill, rejecting those reforms that went beyond a previous vote in parliament that had given Mr Tsipras a mandate to negotiate in Brussels.

In recent weeks, negotiations between Athens and its creditors became increasingly fractious, with each side accusing the other of blackmail. Greece painted European countries, particularly Germany, as bullies, while the creditors said their trust in the Greek negotiators had all but evaporated.