Greek
MPs back new austerity plan as nation faces day of judgment
Despite
a big parliamentary vote in favour of a deal with its creditors,
Greece could be cut loose if it fails to win over EU leaders at a
weekend of summits
Ian Traynor in
Brussels and Graeme Wearden
Friday 10 July 2015
19.21 BST
http://www.theguardian.com/world/2015/jul/10/greeks-facing-day-of-judgment-in-struggle-to-stay-in-eurozone
Greece faces its day
of judgment on Saturday when eurozone countries must decide whether
to open negotiations on a third multi-billion euro bailout for the
insolvent country in five years – or whether it is cut loose and
plunged into financial collapse.
A weekend of what is
billed as “last-chance” summitry is to decide Greece’s fate
after the government of Alexis Tsipras caved in to creditor demands
for further austerity measures in return for the promise of limited
debt relief. With the support of France, he tabled 13 pages of
economic and tax reform pledges as the basis for talks on a new
bailout worth more than €53bn over three years.
In the early hours
of Saturday morning the Greek parliament voted to back Tsipras’s
proposals. Despite a rebellion by some of his own MPs, Tsipras was
given the backing of 250 out of 300 MPs to negotiate this weekend.
Tsipras said the
vote gave him a “strong mandate to complete the negotiations to
reach an economically viable and socially fair agreement”.
“The priority now
is to have a positive outcome to the negotiations. Everything else in
its own time,” he said.
In an ominous sign
for the stability of the government, however, 10 deputies on the
ruling benches either abstained or voted against the measures and
another seven were absent, leaving Tsipras short of the 151 seats
needed for a majority of his own.
Prominent
leftwingers in the governing Syriza party signalled before the vote
that they could not support the mix of tax hikes and spending cuts
proposed by Tsipras, following the rejection of similar austerity
measures by voters in Sunday’s referendum.
Energy minister
Panagiotis Lafazanis, deputy labour minister Dimitris Stratoulis as
well as the speaker of parliament, Zoe Constantopoulou, all
abstained.
“The government is
being totally blackmailed to acquiesce to something which does not
reflect what it represents,” Constantopoulou said.
The Greek proposals
were pored over on Friday after arriving in Brussels and other
European Union capitals late on Thursday evening. The French
president, François Hollande, described the new Greek plan as
“serious and credible” and proved the Tsipras government was
determined that Greece should stay in the eurozone.
There was no comment
from the German chancellor, Angela Merkel, but there were conflicting
signals from parties within her coalition, with some MPs saying it
was an important step forward and others saying Greece was not to be
trusted and should exit the euro.
Tsipras told members
of his own party that he had no mandate to take Greece out of the
euro and said: “We are all in this together”.
Senior eurozone
officials will grapple with the details on Saturday morning before
passing their recommendations to an extraordinary session in Brussels
of the Eurogroup, the committee of 19 eurozone finance ministers.
The committee’s
head, Jeroen Dijsselbloem of the Netherlands, said he expected a
“major decision”.
After five weeks of
breathtaking brinkmanship involving a referendum, marathon
negotiations, countless reform and rescue blueprints, and five months
of stalemate since the radical leftist Syriza party took office, the
finance ministers have to decide whether there is a basis for
launching an attempt to strike a new deal.
EU leaders have
scheduled two extraordinary summits in Brussels on Sunday, the first
involving the 19 eurozone heads of government, followed by those of
all 28 member states including David Cameron and leaders of other
non-euro countries.
These meetings would
be cancelled, senior officials in Brussels said, if the finance
ministers decided on a green light for new bailout negotiations with
Greece.
“I’d be
astonished if the heads overturned a decision of the finance
ministers,” said a senior official involved in the negotiations.
That suggests that
if the Sunday summits go ahead, they will be to plan how to cope with
a Greek banking collapse and social chaos if the Grexit happens.
“I’m not
optimistic,” said a eurozone official. “There are too many
problems, not enough time, too many people who do not believe the
Greeks will deliver their side of the bargain.”
An EU diplomat said
eurozone creditors were very fed up with “five months of
manipulation” by the Greek side and worried whether or not Tsipras
would really push through the reforms demanded by creditors. “It
doesn’t matter what they say, they will never do it.”
Tsipras has
pirouetted this week in a way that has left the Europeans gasping in
incredulity. He broke off negotiations a fortnight ago and announced
a snap referendum on the austerity terms demanded in return for
extending the second bailout which expired on June 30.
He campaigned for a
no vote and won handsomely, backed by more than 61%, before
performing a striking U-turn on Thursday night, re-tabling the same
austerity terms he had campaigned to defeat and which the voters
rejected. The terms included VAT and pension reforms Tsipras had
previously insisted were red lines which would never be crossed.
“On Sunday, the
Greek people voted against these measures,” said Michael Fuchs, the
deputy floor-leader in Berlin Merkel’s governing Christian
Democrats. “I have a little bit of a problem trusting it because
what is the difference between Sunday and today?
Deciding against a
third bailout would leave Greece facing an unprecedented economic
crisis. With its banks closed and capital controls in place, the
financial institutions are rapidly running out of money. Without a
bailout programme, the European Central Bank could cut off the only
lifeline keeping Greece afloat: its emergency liquidity assistance to
Greek banks.
Grexit summits on
Sunday would then focus on helping Greek operations to establish a
secondary parallel currency, the half-way step to a return to the
drachma.
Despite Tsipras’s
claims of a strong mandate for this weekend’s talks, his acceptance
of the austerity measures demanded by the creditors will not be
enough to secure a deal because the goalposts have moved in the two
weeks since he rejected many of the same terms.
The negotiation has
changed. What was being negotiated last month was prolonging an
existing bailout arrangement by several months. Merkel has made plain
that Greece needs to table much more ambitious and draconian measures
to qualify for a new two- to three-year bailout worth a lot more
money.
A German finance
ministry spokesman said it was too late to “repackage” last
month’s proposals and called on Tsipras to demonstrate greater
commitment to an agreement by pushing reformist legislation through
the Greek parliament immediately.
This issue will
figure strongly in Saturday’s negotiations, officials and diplomats
said, pointing particularly to the resistance to a new deal from the
newer and smaller members of the euro in eastern Europe who, in
recent months, have come out of the closet as fiscal hawks and the
loudest critics of Tsipras.
The Slovak finance
minister, Peter Kazimir, a leading hardliner, voiced his scepticism
of Athens’ promises. “How quickly can a caterpillar turn into a
butterfly?” he tweeted.
Dalia Grybauskaite,
the president of Lithuania, said: “It seems those proposals will
really not be enough.”
Her Latvian
counterpart, Laimdota Straujuma, said: “It will be very hard for me
to persuade the parliament. If you were to ask Latvians today whether
they are willing to lend money to Greece, you can probably guess what
their answer would be … At the moment, I see no reason for Latvia
to give money to Greece.”
Estonia, Latvia,
Slovakia and Slovenia take a similar view.
The head of
sovereigns at Fitch’s ratings agency, James McCormack, predicted
the talks would fail and there would be “an eventual exit from the
eurozone” for Greece.
Any agreement that
might be struck would need to be put through the Bundestag early next
week, but Greece fatigue is reaching critical mass in Berlin.
There was some
optimism. Some bookmakersclosed their books for bets on whether
Greece would survive in the euro after an avalanche of betting on
Greece remaining in the currency following the unveiling of Athens’
plan. The financial markets responded favourably to the talk of a
weekend agreement, strengthening the euro against the dollar.
And Paris, in a rare
challenge to Merkel in five years of currency travails, has staked
its all on keeping Greece in the euro, dispatching experts to help
Athens to write its reform manifesto and loudly campaigning for an
agreement to rescue Greece.
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