Europe moved to re-open funding to Greece’s stricken economy yesterday, hours after a fractious Greek parliament approved a tough bailout programme in a vote that left the government without a majority and looking to new elections within months.
Prime Minister Alexis Tsipras won the backing of parliament in the early hours of yesterday for the stringent reform measures demanded by Greece’s creditors led by Germany, but was left weakened by a revolt in his left-wing Syriza party.
Tsipras won the vote thanks to the support of the centre-right New Democracy, centre-left Pasok and centrist To Potami opposition parties.
His Interior Minister, Nikos Voutsis, said that a snap election could be held in September or October, “depending on developments.”
However his position as head of government faces no serious internal challenge and he is expected to reshuffle his cabinet to remove dissident leftists.
He has ruled out early elections and said this week the captain does not leave the ship in a storm.
The move by the Greek parliament was enough to persuade the European Central Bank to re-open vital funds for the Greek banking system under its Emergency Liquidity Assistance (ELA) programme, after euro zone finance ministers signalled they would unlock 7 billion euros ($7.6 billion) in bridge loans.
ECB President Mario Draghi said the ECB would increase ELA funding by 900 million euros. German Finance Minister Wolfgang Schaeuble underlined the risks still surrounding the negotiations that will need to be conducted over the next few weeks, saying a temporary Greek “timeout” from the euro may still be a better option.
After a warning from the International Monetary Fund this week that Greece’s massive public debt could not be managed without a significant writedown, Schaeuble said that a debt “haircut” was incompatible with euro membership and would mean Greece would have to leave the euro, at least temporarily.
Greek banks have been closed for a third week, with capital restrictions in place and cash rationed from automatic teller machines, and they will not be able to re-open until the ECB re-opens emergency funding.
European finance ministers held a conference call yesterday morning to agree on a plan for the 7 billion euros in bridging funds to enable Greece to meet its immediate debt service needs and avoid defaulting on a repayment to the ECB next Monday.
In a statement, they agreed “in principle” to start talks with Greece on a new, 3-year bailout and also called on Athens to adopt a second set of reforms by Wednesday, July 22.
All 28 EU countries are expected to contribute, despite the reluctance of non-euro members such as Britain and the Czech Republic.
The Greek parliament comfortably approved the agreement that Tsipras struck on Monday with the euro zone. But 32 of the 149 lawmakers from Tsipras’s radical left Syriza party voted against the plan while six effectively abstained and one was absent.
Among the dissenters were four members of the government, one of whom resigned. The dissidents also included the speaker of parliament and ex-finance minister Yanis Varoufakis, who compared the Brussels deal with the 1919 Versailles Treaty that imposed unpayable reparations on a defeated Germany after World War One.
Tsipras told lawmakers he had accepted a package he did not believe in and which would harm Greece, but the alternative was a disorderly bankruptcy that would be more catastrophic.
