Greece Debt Crisis: MPs Back Bailout Reform Plan

2015-0712 Greece Debt Crisis MPs Back Bailout Reform Plan

Prime Minister Alexis Tsipras acknowledged that his government had made mistakes

Greece’s parliament has backed a government package of economic reforms aimed at ending the country’s debt crisis and securing a new bailout.

After winning cross-party support in a late-night vote, PM Alexis Tsipras said he had a “strong mandate” to complete negotiations with Greece’s creditors.

However, some of his own MPs withheld their support in protest at austerity measures contained in the new package.

The proposals are to be studied by eurozone finance ministers later.

EU sources says Greece’s creditors – the European Commission, the European Central Bank and the International Monetary Fund – believe the plan is positive.

Eurozone officials are also expected to discuss Greek requests for some of the debt to be rescheduled.


Analysis: BBC’s Chris Morris in Brussels

After multiple meetings in recent weeks, Saturday’s meeting of eurozone finance ministers could be the one that really matters.

They will have to decide whether the new package of proposals from the Greek government is sufficiently detailed to allow formal talks on a third bailout to begin.

One senior official in Brussels said technical experts from the EU and the IMF had assessed the proposals positively, but ministers representing national governments will also have their say.

France has already welcomed the Greek plans, which include spending cuts and tax rises worth more then €12bn. But Germany leads a group of countries that still has serious doubts.

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Mr Tsipras needed the support of the opposition to win the vote.

In total, 251 MPs voted “Yes”, 32 voted “No” with eight abstaining. Nine deputies were absent including former finance minister Yanis Varoufakis. Among the members of Mr Tsipras’s own Syriza party who abstained were Speaker Zoe Constantopoulou and Energy Minister Panagiotis Lafazanis.

“The priority now is to have a positive outcome to the negotiations,” Mr Tsipras said in a statement after the vote. “Everything else in its own time.”

Mr Tsipras is asking creditors for €53.5bn ($59.47bn) to cover Greece’s debts until 2018. It would be the debt-strapped country’s third bailout.

n return, he has given in to demands for a pension overhaul, tax rises and privatisations – measures rejected in a referendum last Sunday.

Greek banks are days away from running out of money and unless a deal is struck the country faces a possible exit from the euro.

The measures submitted in the new Greek document include:

  • tax rise on shipping companies
  • unifying VAT rates at standard 23%, including restaurants and catering
  • phasing out solidarity grant for pensioners by 2019
  • €300m ($332m; £216m) defence spending cuts by 2016
  • privatisation of ports and sell-off of remaining shares in telecoms giant OTE
  • scrapping 30% tax break for wealthiest islands

The BBC’s Mark Lowen in Athens says the package is a major climbdown for the prime minister, whose radical left-wing Syriza party was elected on a strong anti-austerity platform.

Addressing MPs before the vote, Mr Tsipras admitted that his government had made mistakes but he said the new proposals offered the best possible deal for Greece.

He described the lengthy negotiations with the creditors as “a battle”.

“Now I have the feeling we’ve reached the demarcation line. From here on there is a minefield.”

Crisis countdown

  • 11 July: Eurozone finance ministers discuss plans (Brussels 13:00 GMT)
  • 12 July: Eurogroup leaders meet (14:00 GMT) followed by summit of all 28 members of the European Union (16:00 GMT). Both Brussels
  • 20 July: €3bn payment due from Greece to the European Central Bank

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Mr Tsipras said the bailout deal “entails many proposals that are far from our pledges”, but he added it was “marginally better” than the proposals put forward last month by creditors.

He said there was a “national duty to keep our people alive and in the eurozone”.

The Eurogroup – the eurozone finance ministers – has now received an assessment from the EU and the IMF of the new proposals.

The ministers will discuss them from 13:00 GMT and a meeting of eurozone heads of government is scheduled for Sunday.

That will be followed by a full EU summit later that day. Any agreement would have to be ratified by parliaments in several EU states.

Greece in numbers


Greece’s debt mountain


European bailout

  • 177% country’s debt-to-GDP ratio
  • 25% fall in GDP since 2010
  • 26% Greek unemployment rate

Source: ECB, IMF, Greek National Statistics Agency

Greece’s eurozone partners seem divided over the Greek proposals so far.

French President Francois Hollande described them as “serious and credible”, but Germany’s finance ministry warned that there was “very little leeway in terms of restructuring”.

Greece’s creditors have already provided more than €200bn in two bailouts over the past five years. The second expired on 30 June.

Greek banks are closed and a €60 (£43; $66) daily limit on cash machine withdrawals, imposed on 28 June, remains in force for Greek citizens. With a shortage of €20 notes, for many the limit is in effect €50.

The language of debt

Haircut: A reduction – or writedown – in the value of a troubled borrower’s debts. In 2011, Greece’s private lenders received a massive 50% haircut of what they were owed. At this stage the Greeks are being careful not to ask for debt haircuts.

Debt restructuring or rescheduling: Altering the terms of a loan in order to extend the repayment period. It may also mean dismissing part of the money owed. US Treasury Secretary Jacob Lew has said Greece’s creditors should restructure the country’s debt, but that such a move would not necessarily mean writing off a part of what Greece owes them. The IMF’s boss Christine Lagarde has also said Greece needs debt restructuring.

Debt relief: The forgiveness of part or all of a debt (a “haircut”), or the temporary suspension of repayments on the existing debt. The IMF Chief Economist Olivier Blanchard has said any Greek deal should include debt relief.


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