Alexis Tsipras battles own MPs over Greek bailout deal

Kamari, Kos, Greece

A beleaguered Alexis Tsipras was locked in talks on Tuesday with his own MPs amid speculation that the Greek prime minister could be forced to form a national unity government to push through the draconian bailout deal imposed by Brussels on debt-stricken Greece.

Facing a rebellion over the terms of a fresh €86bn (£61bn) rescue package, Tsipras has considered sidelining the increasingly belligerent leftwing faction in Syriza in favour of a broader coalition to push through spending cuts and painful reforms.

In Brussels, meanwhile, EU finance ministers met to discuss how a fresh bundle of loans can be pieced together to bridge Greece’s current funding gap.

Athens faces demands to repay €7bn of debts in July, including €3.5bn due to the European Central Bank on 20 July. This will require a bridging loan of €10bn-€12bn, as the full bailout will not be agreed in time. All of the other 27 EU nations are expected to be asked to contribute.

The UK chancellor, George Osborne, said Britain will not contribute any money to the Greek bailout, telling reporters:

Britain is not in the euro, so the idea that British taxpayers will be on the line for this Greek deal is a complete non-starter. The eurozone needs to foot its own bill.

Britain has contributed around £1bn to the European Financial Stability Mechanism (EFSM), but the funds have remained outside a scheme used to underwrite short-term loans to Greece following a deal between the UK and Brussels in 2010 stipulating that UK funds would only be used to protect the EU.

Britain won’t pay for Greek bailout deal, says George Osborne

In Athens, one of the scenarios being considered is the formation of a cross-party government to not only push reforms through parliament but also play a role implementing them against what is likely to be stiff opposition.

The radical-left party is increasingly fighting a battle for survival in government with cadres saying Syriza’s overall aim is not to go down as a “left parenthesis” in power.

“Everything will be judged with the enforcement of real government policy which will not only be the agreement,” the interior minister, Nikos Voutsis, said on Tuesday morning.

Calling the proposed deal “very difficult, very bad”, the minister said the real issue the government faced would be finding and enacting policies that could have an ameliorating affect on the painful consequences that the measures were likely to have socially.

“Social counter-measures must be found which will give hope to people.”

Tsipras is seeking agreement among the 149 Syriza MPs who dominate the 300-strong parliament, but could splinter in response to a vote on the deal.

Greece has promised to pass into law by Wednesday a string of reforms as the price of a deal that include reforming the VAT system, overhauling pensions and signing up to plans that ensure immediate spending cuts in the event of breaching creditor-mandated budget targets.

Athens has agreed to sell off state assets worth €50bn, with the proceeds earmarked for a trust fund supervised by its creditors. Half the fund will be used to recapitalise Greek banks, while the remaining €25bn will pay down Greek debts as well as be investmented.

Determined to keep his party together ahead of an expected onslaught by MPs opposing the outlined deal, Tsipras summoned his closest allies to a meeting in Athens before a gathering of his parliamentary party on Tuesday.

Tsipras won backing from his coalition partner the Independent Greeks, after its leader Panos Kammenos initially criticised the deal and especially the £50bn of privatisations demanded by Brussels, which must be channelled into a separate fund.

Kammenos said: “We will stand by the Alexis Tsipras government.”

Many of Kammenos’s MPs have said the new agreement, as outlined in the marathon overnight meeting in Brussels, is much harsher than the original one the coalition had endorsed last weekend and, as such, is unacceptable.

But Kammenos is still backing the PM, telling reporters that:

“It is clear to all of Europe that [on Monday] a coup happened in the heart of Europe.

The PM was blackmailed into signing a very different agreement. And this coup is continuing here in Greece where people want the government to fall.”

The former Greek finance minister, Yanis Varoufakis, has called the deal “unviable” and likened it to the 1919 Treaty of Versailles – widely seen as the harbinger of the second world war for its crushing of Weimar Germany.

“This has nothing to do with economics. It has nothing to do with putting Greece back on the rails towards recovery,” Varoufakis told Australia’s public broadcaster, the ABC.

“This is a new Versailles treaty that is haunting Europe again, and the prime minister [Alexis Tsipras] knows it. He knows he’s damned if he does and he’s damned if he doesn’t.”

Emphasing the scale of the task ahead, the Bank of England governor, Mark Carney, told the Treasury committee in Westminster, that success will require “Herculean efforts” from all sides.

He said the scale of structural reforms, fiscal adjustment, privatisations required will be significant with “big execution risks”.

The central bank chief also put his weight behind arguments put forward by the International Monetary Fund that Greece needs its €340bn debt burden with public and private lenders to be cut if it is to emerge from under its debt mountain. He warned that Greece’s debts “are not sustainable in their current form”.

Powered by Guardian.co.ukThis article was written by Phillip Inman in London, Helena Smith in Athens and Jennifer Rankin in Brussels, for theguardian.com on Tuesday 14th July 2015 12.40 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

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