Greek lawmakers approved a draft bailout deal Friday in the hope of ensuring the country’s place in the euro, but the government suffered significant dissent from left-wing hardliners within its ranks, raising the likelihood of early elections.
The government needed the bill to pass in time for Finance Minister Euclid Tsakalotos to head to Brussels to meet his eurozone counterparts, who will decide Friday whether to approve the draft agreement.
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The rescue package would give Greece about 85 billion euros ($93 billion) in loans over three years in exchange for harsh spending cuts and tax hikes. Unable to borrow on the international markets, another bailout is all that stands between Greece and a disorderly default on its debts — as soon as next week — that would force it out of Europe’s joint currency.
The bill passed thanks to support from opposition parties, with 222 votes in favor, 64 against, 11 abstentions and three absent in the 300-member parliament.
Although approved by a comfortable majority, the result was a blow to Prime Minister Alexis Tsipras, who saw more than 40 of his 149 radical left Syriza party lawmakers vote against him. He has come under intense criticism from party hardliners for capitulating to the creditors’ demands for budget cuts — austerity measures he had promised to oppose when he won elections in January.
The bill includes reforms increasing personal, company and shipping taxes, reducing some pensions, abolishing tax breaks for some groups considered vulnerable and implementing deep spending cuts, including to the armed forces.
“We welcome the successful vote in the Greek Parliament this morning,” said German Foreign Ministry spokesman Sebastian Fischer, whose country has been the single largest contributor to Greece’s previous two bailouts and is the country’s harshest critic.
“Now an important precondition has been met for the process to continue,” he said.
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The EU Commission, meanwhile, is confident that “a positive outcome is entirely feasible today” at the eurozone meeting in Brussels, spokeswoman Annika Breidthardt said.
The mounting discord within Syriza, however, is threatening to split the party and could lead to early elections. The stock market in Athens slid on the news and was down 2.4 percent in afternoon trading.
State television said Tsipras was expected to call a vote of confidence in his government, but that was not confirmed.
Government spokeswoman Olga Gerovasili said any action would come after Aug. 20, when Greece has to make a large debt repayment to the European Central Bank.
Culture Minister Nikos Xydakis, speaking on state television, noted early elections were now likely. “The agreement has cost the government its majority … As things have turned out, the clearest solution would be elections,” he said.
Tsipras has maintained his public popularity in Greece despite his U-turn on austerity policies, and consistently leads opposition parties in opinion polls. An election would allow him to remove the hard line elements from his party, but it is not a risk-free option.
“An election in the next few months would create more political uncertainty, delay economic recovery and impede reform implementation and the possibility of opening talks on debt relief as desired by the (International Monetary Fund) as a condition of its involvement in funding the program,” said Joan Hoey, analyst for Europe at the Economist Intelligence Unit.
“However, it appears to be unavoidable if Greece is to have a government capable of implementing the agreement.”
The deal also needs approval from the parliaments of several other countries, including that of Greece’s harshest critic, Germany, before any funds can be disbursed. Some nations, such as Finland, have already given their approval.
Syriza dissenters angrily challenged the government during the all-night parliamentary session.
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“I feel ashamed for you. We no longer have a democracy … but a eurozone dictatorship,” prominent party member and former energy minister Panagiotis Lafazanis said before the vote. Lafazanis co-signed a declaration along with another 12 left-wing politicians Thursday declaring they would start a new anti-austerity movement. He stopped short of quitting Syriza.
The terms of the new bailout were agreed earlier this week with creditor negotiators from the European Central Bank, European Commission and IMF.
“We took a painful decision of responsibility, and took a step back,” Tsipras said in his defense of the bailout. “We took the decision to remain alive instead of committing suicide and complaining how unfair it was.”
Tsipras said Germany, and in particular its finance minister, Wolfgang Schaeuble, was attempting to undermine Greece and its position in Europe’s joint currency, and would rather see Greece kicked out of the euro.
Some creditors have proposed giving Greece an interim loan to be able to make its Aug. 20 debt repayment and give them more time to fine-tune the deal. Greece does not want that and is hoping to tap the full bailout package by next week.
Germany has so far maintained a cautious stance.
German government spokeswoman Christiane Wirtz reiterated Friday that “the participation of the IMF is of decisive importance for the government.”
The IMF considers Greece’s debt to be unsustainable and says the country needs debt relief of some sort. The fund has said it will decide on whether to participate in the new bailout once it has been set up and Greece’s European partners have decided on how to ease its debt burden.
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It estimates that would occur after the first review of the new bailout, about three months after it begins.
Arriving for the eurozone meeting Friday, French Finance Minister Michel Sapin said the debt issue was not on the table for this gathering, and that he and his colleagues would look to discuss the reprofiling of Greece’s debt to make it sustainable in October.