World Economy

Greek Lawmakers Split Over Bailout

Greek Lawmakers Split Over BailoutGreek Lawmakers Split Over Bailout

Lawmakers from Greece’s ruling Syriza party and their allies were arguing behind closed doors on Tuesday about whether to back sweeping reforms the government must ram through parliament as it races to meet the terms of an unpopular bailout deal.

Having staved off financial meltdown with a new agreement from Greece’s creditors, Prime Minister Alexis Tsipras has less than 48 hours to smother dissent from hardliners and pass measures tougher than those rejected in a referendum days ago, Reuters reported.

Syriza and its junior coalition ally held separate meetings to prepare for parliament sittings to pass the laws, which include plans for tax hikes, pension reforms and tighter supervision of the government’s finances.

It was a spectacular turnaround for a Syriza party voted into power in January promising to end years of cuts and recession in a country where a quarter of people are unemployed. There was some speculation, including in Germany’s mass-selling Bild newspaper, that Tsipras could resign.

Comparing the challenge facing the government to the Gordian Knot of mythology that was impossible to untie, Interior Minister Nikos Voutsis was nevertheless confident that Tsipras could muster enough votes in parliament.

The party’s junior coalition partner promised to support the government, with the ambiguous caveat that it would only vote for bailout measures agreed before last weekend’s summit in Brussels, which were less stringent.

“We are committed to voting for what we decided in the council of the political leaders and only that, no other measures that are imposed,” Panos Kammenos, head of the right-wing Independent Greeks, told reporters.

He and a parliamentary spokesman for Syriza railed against what he described as a “coup” by creditors to force Greece to accept harsh reforms, while opponents of the new measures are planning strikes and protests in the coming days.

 IMF Payment Default

Greece defaulted on another payment due to the International Monetary Fund on Monday, an IMF spokesman said, pushing the country’s arrears up to €2 billion ($2.2 billion) as the country tries to secure an emergency financing deal, Dow Jones reported.

Greece in June became the first advanced economy in the IMF’s seven-decade history to default on a loan payment to the fund, after months of bailout talks failed to yield an agreement. Early Monday, Greece agreed to a preliminary financing agreement that could unlock up to €86 billion in new loans, but there are a host of political and technical hurdles that Athens and its eurozone creditors must overcome before it can tap the promised funds.

 More Debt Relief

A secret IMF study showed Greece needs far more debt relief than European governments have been willing to contemplate so far, as Germany heaped pressure on Athens on Tuesday to reform and win back its partners’ trust.

The study, seen by Reuters, said European countries would have to give Greece a 30-year grace period on servicing all its European debt, including new loans, and a dramatic maturity extension. Or else they must make annual transfers to the Greek budget or accept “deep upfront haircuts” on existing loans.

The Debt Sustainability Analysis is likely to sharpen fierce debate in Germany about whether to lend Greece yet more money.