Greek parliament to vote on controversial bailout

The crucial vote comes hours after the International Monetary Fund issued a stark warning that Greece would need far more debt relief to stop it crashing out of the common currency than European governments have so far been willing to contemplate.

The last-ditch deal struck Monday saw Tsipras agree to sweeping changes to labour laws, pensions, VAT and other taxes — many of which had been rejected by voters in a public referendum — in exchange for new funds to keep Greece’s struggling economy alive.

The parliament in Athens must approve the deal before the 18 other eurozone leaders start negotiations over what Greece is to get in return: a three-year bailout worth up to 86 billion euros ($95 billion), its third rescue programme in five years.

But while the motion is expected to pass, Tsipras has been forced to turn to pro-European opposition parties to get it through in the face of opposition from some 30 rebel lawmakers in his own radical left Syriza party, raising questions about his political survival.

The embattled premier said he took “full responsibility” for signing an accord he did “not believe in, but which I signed to avoid disaster for the country” as it teetered on the brink of economic collapse.

“A prime minister must fight, speak the truth, take decisions and not run away,” Tsipras said in an interview on Greek public television, when asked whether he would resign if the reforms fail to pass or he loses his parliamentary majority.

Fresh polls published late Tuesday by Kapa Research found 72 percent of Greeks surveyed thought the deal was necessary, with the majority blaming Europe for the “tough measures”, but many see it as a humiliating climb down for a country still reeling from years of painful austerity.

Civil servants are set to stage a 24-hour strike on Wednesday, the first big stoppage since Tsipras took power, while several in Syriza have vowed to vote against the plans, which contradict much of their own agenda.

“The great majority of Syriza organisations oppose this agreement… in terms of labour and pension issues this is worse than the last two bailouts,” parliament vice-president Despoina Haralambidou told Vima FM radio.

‘Grexit’ still possible

Under the new plan, eurozone governments will contribute between 40 and 50 billion euros to Greece’s new three-year bailout, the IMF will contribute another major chunk and the rest will come from selling off state assets and the financial markets, a European official said.

Greek assets for privatisation will be parked in a special fund worth up to 50 billion euros, with some 25 billion euros of the money earmarked to recapitalise Greece’s banks.

Tsipras said the establishment of the fund meant ordinary Greeks’ savings were safe, but added that the reopening of the banks — which have been closed for over a week — depended on the finalising of the deal, which could take a month.

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 a huge debt repayment due on Monday.

Tsipras has predicted “the great majority of Greek people” will support the deal, but admits he “cannot say with certainty” that it will be enough to stop Greece exiting the eurozone — a so-called “Grexit” — until the final bailout agreement is signed.

Adding to his concerns, the IMF warned late Tuesday in a study that Greece’s creditors will still have to go “far beyond” their existing estimates for debt relief to stabilise the country’s finances.

The EU needs to decide between a dramatic extension of grace and payment periods for the debt, direct cash payments to the government to finance its deficit, or a debt “haircut”, or writedown.

“The dramatic deterioration in debt sustainability points to the need for debt relief on a scale that would need to go well beyond what has been under consideration to date,” the new study said.

A senior IMF official also said the fund would only participate in a third bailout if its EU creditors produce a clear plan. The current deal “is by no means a comprehensive, detailed agreement”, the official said.

More payments due

European governments on Tuesday also clashed over options to help Greece meet its short-term cash needs while it waits for a eurozone bailout deal to be finalised, likely to take at least four weeks.

Greece’s creditors estimate Athens needs 12 billion euros to get through mid-August — including 4.2 billion euros it is due to pay the ECB on Monday — but countries such as Britain are resisting contributing to any bridge financing.

In a sign of the ongoing concern about the global fallout of the Greek crisis, US Treasury Secretary Jacob Lew will travel to Germany and France on Wednesday and Thursday for talks with top officials.

If Greece does pass the agreement, Europe’s next step would be to push the deal through several national parliaments, many in countries that are loath to afford Athens more help.

Germany’s Bundestag is likely to vote on Friday, provided the Greek parliament rushes through the four new market-oriented laws by Wednesday.

A new poll said 55 percent of Germans supported Chancellor Angela Merkel on the bailout deal, while a third said they would have preferred a Grexit.