Greece finally reaches deal to release €12bn bailout funds

ECB stress tests show country's banks needs €14bn to fill a capital shortfall

Greek Finance Minister Euclid Tsakalotos
(Image credit: Angelos Tzortzinis/AFP/Getty Images)

Greece crisis: debt deadlines loom after key vote passed

23 July

Greece took a second step back from the brink of an exit from the euro overnight as it passed another package of measures demanded by its creditors. Attention will now shift to the gruelling timetable under which bailout negotiations must be completed.

As with a first vote earlier this month on controversial cuts to pensions and tax increases, this second set of more technical measures on issues such as banking rules and judicial reforms passed easily, by 230 votes to 63. The Guardian reports the number of rebels on government benches actually decreased by three, with even firebrand former finance minister Yanis Varoufakis voting in favour.

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This will not be the last vote needed to pass the extensive and detailed list of economic and legal reforms to which Greece's government has agreed. The BBC notes that in an attempt to avert a further revolt two controversial changes phasing out early retirement and increasing VAT for farmers have been delayed to August.

These will also need to be passed, but negotiations on an €86bn third bailout could still begin as early as Friday. It is hoped that an agreement on the terms of the deal, including any debt relief and the level of austerity Greece will be required to endure, can be reached before a €3.5bn bond becomes due to the European Central Bank on 20 August.

Greek newspaper Kathimerini reports some European officials have acknowledged this timetable is tight, especially given how fraught previous discussions have been and the enmity that now exists between key stakeholders. A further raid on emergency European stability funds, from which €7bn was drawn last week to meet repayments to the ECB and clear arrears with the International Monetary Fund, is possible to avert default.

One major area of dispute will be debt relief, not least since the IMF surprisingly indicated it may refuse to participate in any deal that does not sufficiently ease the terms of repayments. German chancellor Angela Merkel has indicated she would consider concessions, but only after "the first successful review" of the reforms making their way through the Greek parliament has been completed.

A further complication is the weakening of the Greek government. It has been reliant on opposition votes and the Syriza party – the majority partner in the coalition – is bitterly divided. According to the Financial Times this could lead to early elections being called. This would likely happen after bailout discussions have concluded, as to do otherwise would throw the deal into fresh turmoil.

Greece crisis: Merkel hints at debt relief, but battle remains

20 July

German chancellor Angela Merkel has offered a light at the end of the tunnel to Greeks hopeful that some of their vast debts will be written off, but she insists that the beleaguered nation must first implement a controversial package of reforms that is yet to receive full parliamentary approval.

While this new development will be welcomed as a sign that Germany, seen as the key stakeholder from the Euro bloc, is moving closer to the position advocated by bailout partners, a long road lies ahead. Merkel says that limited relief, including extending repayment deadlines and reducing interest rates, may be considered, but not until "the first successful review" of a reform programme which is still subject to a second vote in the Greek parliament has been completed.


Greece's parliament has so far voted through one set of measures, despite a rebellion from the government's own MPs that prompted a cabinet reshuffle by prime minister Alexis Tsipras last week. Another key vote is set to take place on Wednesday, which Bloomberg says will include tax increases on farmers. Once this has been approved negotiations on the €86bn bailout deal agreed so far only in principle will take place.

The IMF, to which Greece is currently in arrears after missing a payment in June, has said that restructuring of the country's "unsustainable" €320bn debt pile is essential as part of these talks. The Financial Times reports that the IMF could abandon the bailout deal if no action is taken in this regard.

The first set of measures passed by Greece last week triggered the release of a €7bn bridging loan from Europe and a further €900m in emergency liquidity from the European Central Bank, which will enable banks to reopen this morning for the first time in three weeks. The Guardian says that Greeks will now be able to withdraw a weekly allowance of €420 and access deposit boxes, but that other capital controls remain in place.

Greece crisis: German parliament expected to approve bailout

17 July

The German parliament is voting on whether to allow negotiations on a new bailout package for Greece, with the motion expected to pass comfortably despite strong opposition.

It comes after the Greek parliament voted in favour of harsh economic reforms in return for the fresh €86bn bailout. The deal now requires the backing of several other European parliaments before formal negotiations can begin.

Ahead of today's vote in the Bundestag, German Chancellor Angela Merkel warned MPs that a failure to back the proposal would cause chaos in the eurozone, Reuters reports.

"We would be grossly negligent, indeed acting irresponsibly if we did not at least try this path," she said.

But her views don't appear to be shared by the German taxpayers, who contributed the most to Greece's previous two bailouts. A poll conducted this morning revealed that 49 per cent of Germans did not want the country to enter into another round of bailout talks.

Bild, one of the country's best-selling tabloids, ran the headline: "Seven reasons why the Bundestag should vote No today." It listed "a Grexit is a better solution" and "our grandchildren will pay" among the reasons.

The mood in Merkel's party is not much better, says the BBC's Jenny Hill. At least 48 of Merkel's MPs have indicated they will defy her. "Others will go along with the party line but grudgingly; many here struggle to justify a third bailout to taxpayers in their constituencies."

Germany's Finance Minister Wolfgang Schaeuble has gone even further, suggesting Greece might be better off taking a "time-out" from the eurozone.

Meanwhile, the European Central Bank (ECB) has agreed to increase emergency funding to Greek banks by €900m for one week.

This will allow the country's struggling banks to reopen on Monday – three weeks after they were first closed. Capital controls are likely to remain in place but with less stringent restrictions.

A bridging loan worth €7bn has also been approved by eurozone finance ministers in order to try and keep the country afloat until the bailout deal is finalised.

Why are Greece and Germany agreeing to a deal they don't like?


Greece crisis: bailout approved amid violent clashes in Athens

16 July

Greek MPs have voted in favour of harsh economic reforms in return for a fresh €86bn international bailout, paving the way for a new round of talks.

While the new austerity measures passed comfortably in the Greek parliament, Prime Minister Alexis Tsipras faced a significant rebellion within his own party.

Tempers flared in the chambers, with parliamentary speaker Zoe Constantopoulo branding the measures "social genocide". Deputy finance minister Nadia Valavani resigned in protest, arguing it was impossible for her to continue in her role.

Speaking to parliament, Tsipras acknowledged that the measures were harsh and that they would not benefit the Greek economy, "but I'm forced to accept them," he said.

"The Greek people can understand the difference between those who fight in an unfair battle and those who just hand in their weapons," he added.

The rebellion within the Syriza party is likely to have immediate political ramifications. "[Tsipras] has been weakened and will now need a reshuffle or a vote of confidence," predicts the BBC's Mark Lowen.

Tensions also soared outside parliament, with thousands of people taking to the streets of Athens to protest against further austerity. Though largely peaceful, clashes erupted between protesters wielding Molotov cocktails and riot police who were forced to respond with tear gas.

One protester told the Daily Telegraph: "Our Greek leaders have spent five years fighting austerity measures and in the end, despite a 'No' vote in the referendum, they have just rolled over and said 'Yes'."

Eurozone finance ministers are set to begin a fresh round of bailout discussions today over plans to offer short-term emergency funding to Greece to help keep the country afloat until the rescue package is finalised.

The European Central Bank's governing body will also meet to discuss how to help the country's struggling banks, which have been shut for over two weeks.

Several other European parliaments now need to approve the package before the bailout can go ahead. France's national assembly has already approved the deal, with Germany's Bundestag expected to vote on the measures tomorrow.

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