Greek PM battles revolt after eurozone approves huge bailout

  • AFP, Athens
  • Updated: Aug 15, 2015 21:01 IST

Greek Prime Minister Alexis Tsipras on Saturday battled a major revolt amongst his radical-left party members who opposed the third huge bailout for the crisis-hit country.

A third of MPs in Tsipras's radical-left party Syriza rebelled against him and he only managed to win the vote with opposition help -- prompting fresh expectations that he will be forced to call early elections.

Finance ministers from the 19-member eurozone approved a package late Friday that will see Greece receive 86 billion euros ($96 billion) over three years in exchange for far-reaching pro-market reforms.

The green light for the deal, designed to stop Athens from defaulting on its huge debts and crashing out of the euro, came hours after Greece's parliament voted through the agreement after a bitter all-night debate.

But Tsipras insisted the bailout was in Greece's best interests, saying: "The agreement will advance Greece by making its financial system more stable, starting right now."

'Looked into the abyss'

Syriza swept to power in January on a wave of public anger against steep tax rises, spending cuts and reforms demanded by Athens' creditors -- the EU, European Central Bank and International Monetary Fund -- in exchange for two previous bailouts.

Critics accuse Tsipras of caving to blackmail from the creditors in agreeing to more painful reforms in exchange for badly-needed cash.

European Commission head Jean-Claude Juncker said Athens had come perilously close to tumbling out of the eurozone and into the unknown, but six months of fraught negotiations had paid off.

"Together, we have looked into the abyss. But today, I am glad to say that all sides have respected their commitments. Greece is living up to its ambitious reform commitments," he said in a statement after six hours of gruelling talks in Brussels Friday.

Greece will receive a first instalment of 13 billion euros next week, helping cover a debt payment due to the ECB next Thursday.

Eurozone ministers said the first main 26-billion tranche of the bailout will include an "immediate" payment of 10 billion euros to Greece's banks, which are desperately short of cash after panicked customers flocked to withdraw their money.

The deal must still be approved by parliaments in several European countries to go ahead -- notably in Germany, Europe's effective paymaster, where lawmakers are set to vote on Wednesday.

Election headache

Tsipras now faces the unenviable task of implementing the reforms -- many of which must be voted into law, a worrying prospect in a parliament where so many of his lawmakers have turned against him.

Greece's Kathimerini newspaper on Saturday counted nearly 40 measures on tax, competition, social security and pensions that must be voted through and brought into force by the end of the year.

Tsipras has made it known to his European partners that early elections are inevitable, according to Greek media reports.

But the question of when to hold the vote represents a major headache for the prime minister.

September elections could give him the upper hand against Syriza's leftist bloc by giving them less time to organise, but this could delay the implementation of the bailout.

A vote by the end of October, on the other hand, could allow Tsipras to benefit from a glowing first report from the creditors -- but this could prove detrimental if it allowed his high popularity ratings to slip as the first reforms bite.

The accord goes far beyond economic management to include an extensive overhaul of Greece's health and social welfare systems, its business practices and public administration.

Greece will have to balance its books to produce a primary budget surplus -- that is, before interest payments -- and take on a major privatisation programme to help reduce a debt mountain equivalent to 170 percent of its GDP.

Debt relief remains a major sticking point between Greece's creditors themselves, with the IMF insisting the burden must be brought down to a sustainable level, but Germany digging in its heels.

Berlin has been hostile to the prospect of a "haircut" or partial writedown that could potentially cost it and other holders of Greek debt billions of euros.

Eurogroup head Jeroen Dijsselbloem said the eurozone's finance ministers also opposed a haircut, but was ready to consider other options, including extending the period of the loans.

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