Greek legislators approved a bailout package that may unlock as much as 86 billion euros ($96 billion) and help the nation avoid a default next week when it has to make a payment to the European Central Bank.
After an all-night debate in Athens, Prime Minister Alexis Tsipras had to rely on opposition votes to secure parliament’s backing for a deal that includes sweeping economic reforms and budget cuts mandated by Greece’s creditor institutions. Tsipras will ask for a confidence vote later this month after he suffered multiple defections from his Syriza party, according to a government official who asked not to be named in line with policy.
“The first phase of a tough, painstaking process closes today,” Tsipras told lawmakers before the vote. “The real dilemma wasn’t a memorandum or an uncontrolled default; nobody could have chosen an uncontrolled default. The real dilemma was a memorandum with the euro, or a memorandum with the drachma.”
Greek stocks dipped as euro-area finance ministers prepared to meet in Brussels later Friday to discuss political backing for the deal, struck this week with negotiators from the ECB, the European Commission, the International Monetary Fund and the European Stability Mechanism rescue fund.
The IMF said late yesterday that the agreement reached in Athens was a “very important step forward” that “puts in place far-reaching policies to restore fiscal sustainability, financial sector stability, and sustainable growth.” It will work with authorities “to develop their program in more detail and for Greece’s European partners to make decisions on debt relief that will allow Greece’s debt to become sustainable.”
The bailout package, Greece’s third since 2010, spells out the details of the economic overhaul the government committed to in exchange for the loans. Measures include a clampdown on early retirement, state asset sales, the recapitalization of Greece’s banks and changes to the regulation of bakeries and pharmacies.
The European institutions involved in putting together the agreement voiced “serious concerns” about Greece’s ability to repay its debt. Greece’s obligations will peak at 201 percent of gross domestic product next year, before dropping to 160 percent in 2022 under a new rescue program, according to their projections in a document obtained by Bloomberg.