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Make-or-break moment as Greek MPs prepare to vote on austerity proposals Make-or-break moment as Greek MPs prepare to vote on austerity proposals
(about 1 hour later)
Alexis Tsipras, the Greek prime minister, is preparing for a make-or-break parliamentary vote over the austerity measures Athens must take in exchange for a fresh bailout from its eurozone partners.Alexis Tsipras, the Greek prime minister, is preparing for a make-or-break parliamentary vote over the austerity measures Athens must take in exchange for a fresh bailout from its eurozone partners.
Just hours before the vote, Tsipras suffered a blow with the loss of a key minister, Nadia Valavani. The deputy finance minister resigned, saying it was “impossible” for her to keep serving in the Tsipras government given the austerity measures he had agreed to. She warned the nation faced a “crushing” capitulation at the hands of its creditors in Brussels. Just hours before the vote, Tsipras suffered a blow with the loss of a key minister, Nadia Valavani. The deputy finance minister resigned, saying it was “impossible” for her to keep serving in the government given the austerity measures to which Tsipras had agreed. She warned the nation faced a “crushing” capitulation at the hands of its creditors in Brussels.
Tsipras must keep the number of rebels within his own party below 40, in order to pass the measures required as part of the controversial rescue package agreed after marathon talks over the weekend. Tsipras must keep the number of rebels within his own party below 40 in order to pass the measures required as part of the controversial rescue package agreed after marathon talks last weekend.
The deal – which includes austerity measures tougher than those overwhelmingly rejected by the Greek public in a referendum this month – has come under fresh fire, after the International Monetary Fund published a highly critical paper calling for large-scale debt relief for the stricken country. The deal – which includes austerity measures tougher than those overwhelmingly rejected by the Greek public in a referendum this month – has come under fresh fire after the International Monetary Fund published a highly critical paper calling for large-scale debt relief for the stricken country.
The IMF’s “debt sustainability analysis”, which was published by the Washington-based lender after parts of it were leaked to the media, suggested Greece may need a 30-year moratorium on repayments; or a substantial “haircut” – a partial write-off of its debts.The IMF’s “debt sustainability analysis”, which was published by the Washington-based lender after parts of it were leaked to the media, suggested Greece may need a 30-year moratorium on repayments; or a substantial “haircut” – a partial write-off of its debts.
Michel Sapin, France’s finance minister, supported the analysis, saying: “The IMF is saying the same thing as we are.” But Angela Merkel, the German chancellor, has made clear that a debt haircut is unacceptable.Michel Sapin, France’s finance minister, supported the analysis, saying: “The IMF is saying the same thing as we are.” But Angela Merkel, the German chancellor, has made clear that a debt haircut is unacceptable.
Eurozone ministers received the paper before the marathon 17-hour summit at the weekend; but the deal that emerged contained no upfront pledge of debt relief – only a promise to discuss it. Eurozone ministers received the paper before the 17-hour summit last weekend; but the deal that emerged contained no upfront pledge of debt relief – only a promise to discuss it.
Greece is already in arrears to the IMF, and the emergence of the paper raised doubts whether the Washington-based lender would be willing to contribute to another Greek bailout.Greece is already in arrears to the IMF, and the emergence of the paper raised doubts whether the Washington-based lender would be willing to contribute to another Greek bailout.
The IMF’s open scepticism about the sustainability of the Greek deal emerged as Jack Lew, the US Treasury Secretary, flew to Europe for talks with policymakers about resolving the situation. He will meet Mario Draghi, president of the European Central Bank, on Wednesday, and Wolfgang Schäuble, Germany’s finance minister, on Thursday. The IMF’s open scepticism about the sustainability of the Greek deal emerged as Jack Lew, the US treasury secretary, flew to Europe for talks with policymakers about resolving the situation. He will meet Mario Draghi, the president of the European Central Bank, on Wednesday, and Wolfgang Schäuble, Germany’s finance minister, on Thursday.
Lew has urged his eurozone partners to agree a deal that puts the country’s economy on a sustainable footing.Lew has urged his eurozone partners to agree a deal that puts the country’s economy on a sustainable footing.
As Tsipras battles to shore up support in Athens, officials in Brussels have been scrambling to assemble a short-term financing package – expected to be worth about €7bn (£5bn) – to keep Greece afloat until the details of a new bailout can be hammered out.As Tsipras battles to shore up support in Athens, officials in Brussels have been scrambling to assemble a short-term financing package – expected to be worth about €7bn (£5bn) – to keep Greece afloat until the details of a new bailout can be hammered out.
The European commission has confirmed that it plans to tap the European Financial Stability Mechanism, the EU-wide bailout fund, to meet part of the cost of a bridging loan, putting the UK on the hook for just over 15% of it.The European commission has confirmed that it plans to tap the European Financial Stability Mechanism, the EU-wide bailout fund, to meet part of the cost of a bridging loan, putting the UK on the hook for just over 15% of it.
Valdis Dombrovkis , the commissioner for the euro, said the EFSM was being considered because of the “obvious absence of any other solution”.Valdis Dombrovkis , the commissioner for the euro, said the EFSM was being considered because of the “obvious absence of any other solution”.
But George Osborne has demanded that eurozone countries indemnify the Treasury against any losses if Britain is forced to contribute. But George Osborne, the UK chancellor, has demanded that eurozone countries indemnify the Treasury against any losses if Britain is forced to contribute.
The Treasury is pushing for the €1.9bn of profits the European Central Bank has made on Greek bonds - a pot of money Greek’s embattled Syriza government had previously hoped to tap into - to be set aside in an account that could be used to compensate non-euro member countries for any losses. The Treasury is pushing for the €1.9bn of profits the European Central Bank has made on Greek bonds – a pot of money Greek’s embattled Syriza government had previously hoped to tap into – to be set aside in an account that could be used to compensate non-euro member countries for any losses.
Osborne has insisted that Brussels honour a promise made to David Cameron in 2011 that British taxpayers would not be forced to underwrite eurozone bailouts. A Treasury insider said: “This would be strengthening that promise, by giving it legal form.”Osborne has insisted that Brussels honour a promise made to David Cameron in 2011 that British taxpayers would not be forced to underwrite eurozone bailouts. A Treasury insider said: “This would be strengthening that promise, by giving it legal form.”