How a Greek tragedy can avoid becoming tragedy
Greek Prime Minister Alexis Tsipras won backing yesterday from lawmakers in Athens for painful reforms - but it remained unclear if this would be enough to secure a bailout from German and other eurozone ministers meeting in Brussels.
Tsipras had to rely on opposition votes from the Right in parliament on Friday night after some of his leftist allies opposed spending cuts, tax rises and other measures he proposed in order to unlock €54bn in a three-year bailout that would save Greece from a bankruptcy and potential exit from the euro.
But Germany, the biggest creditor in two previous bailouts totalling €240bn, is deeply sceptical after five months of abortive negotiations.
Eurozone sources said it was far from certain that the 19-strong euro-group of finance ministers would agree to open negotiations at a crisis meeting which got underway yesterday afternoon in Brussels.
"The high figures for financing needs over the next three years may be too high and too sudden," one said. He added that EU and IMF experts estimated Greece's needs at €82bn, factoring in cash to come from the IMF and other EU sources.
A spokesman for German finance minister Wolfgang Schaeuble declined comment on a newspaper report that he found Tsipras's proposals inadequate and would oppose further talks. He said the outcome of Saturday's talks remained "completely open".
Schaeuble, as well as French finance minister Michel Sapin, arrived more than two hours early, as did new Greek finance minister Euclid Tsakalotos.
IMF head, Christine Lagarde, said on arrival: "I think we are here to make a lot more progress."
German Chancellor Angela Merkel has made it clear she does not want to see a Grexit that could disrupt the ailing European economy and undermine a supposedly irreversible union. However, she faces stiff opposition among her own conservative allies.
A positive assessment of the Greek proposals delivered by the European Commission, European Central Bank and International Monetary Fund late on Friday, along with bullish comments from Athens' key ally France, had raised expectations that the euro-group would give a green light to new loan negotiations.
European leaders, including Chancellor Merkel and French President Francois Hollande, are due to meet today, either to endorse the finance ministers' decision or to take steps to contain the fallout from a potential Greek bankruptcy.
Some of the smaller east European states are reluctant to pour more money into a country some believe the eurozone would be better off without, but Lithuania's finance minister said the euro-group would judge Tsipras's credibility. "We have to take the best decision for the eurozone," said Rimantas Sadzius.
"We have to evaluate, how constructive and realistic it is. We have no right to blindly borrow taxpayers' money - we have to be sure they will be paid back."
With Greece's banks shut and completely dependent on a credit lifeline from the ECB, the latest Greek proposals were seen as a last chance to avert financial collapse.
The European Commission, ECB and IMF told eurozone governments, after a review of Tsipras's proposals, that there was sufficient basis to start negotiating conditional loans from the European Stability Mechanism (ESM) bailout fund.
But in an ominous sign for the stability of the Greek government, 10 members on the ruling benches abstained or voted against the measures and another seven were absent, leaving Tsipras short of the 151 seats needed for a majority of his own.
Prominent radicals in his Syriza party said that they could not support the mix of tax hikes and spending cuts proposed by Tsipras, following the rejection of similar austerity measures in last Sunday's referendum.
Energy minister Panagiotis Lafazanis, deputy Labour minister Dimitris Stratoulis, as well as the speaker of parliament, Zoe Constantopoulou, all called 'Present' - in effect abstaining from the vote.
"The government is being totally blackmailed," Constantopoulou said.
While some in his own party were stunned by the Prime Minister's acceptance of previously spurned austerity measures, Tsipras said he would now focus on securing a deal.
After the widespread jubilation in Athens last Sunday following the resounding rejection of further austerity in a referendum, there was bitterness that parliament was being asked to accept a strikingly similar package of measures.
The leader of the right wing Independent Greeks party, the junior coalition party in Tsipras' government, said his members would back the proposals "with a heavy heart".
US Treasury Secretary Jack Lew said on Friday that Greece and its creditors appeared to be closer to a deal, calling for an adjustment to Athens' debt burden to ease its cash flow.
Greece asked for €53.5bn to help cover its debts until 2018, a review of primary budget surplus targets in the light of the sharp deterioration of its economy, and a "re-profiling" of the country's long-term debt.
A senior EU official said the euro-group talks would include discussions on whether Greece needs some debt relief.