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| Greece edges towards third bailout amid positive signals from Germany | Greece edges towards third bailout amid positive signals from Germany |
| (35 minutes later) | |
| Greece is close to clinching a three-year bailout worth more than €85bn (£60bn) after parliamentarians in Athens backed the deal and Germany sent conciliatory signals ahead of a crucial meeting of eurozone finance ministers. | Greece is close to clinching a three-year bailout worth more than €85bn (£60bn) after parliamentarians in Athens backed the deal and Germany sent conciliatory signals ahead of a crucial meeting of eurozone finance ministers. |
| Representatives of Greece’s main European creditors were generally upbeat about finalising the bailout terms after the Greek prime minister, Alexis Tsipras, secured approval from MPs for a huge package of legislation on Friday morning. The vote committed the indebted country to radical economic and fiscal reforms needed to secure the rescue money. | Representatives of Greece’s main European creditors were generally upbeat about finalising the bailout terms after the Greek prime minister, Alexis Tsipras, secured approval from MPs for a huge package of legislation on Friday morning. The vote committed the indebted country to radical economic and fiscal reforms needed to secure the rescue money. |
| Related: Alexis Tsipras hit by Syriza rebellion as Greece approves bailout deal | Related: Alexis Tsipras hit by Syriza rebellion as Greece approves bailout deal |
| Wolfgang Schäuble, the German finance minister and the main critic of the proposed new deal, toned down his reservations at a meeting of his eurozone peers in Brussels several hours after the Athens vote on Friday, voicing optimism that ministers would back a deal. | Wolfgang Schäuble, the German finance minister and the main critic of the proposed new deal, toned down his reservations at a meeting of his eurozone peers in Brussels several hours after the Athens vote on Friday, voicing optimism that ministers would back a deal. |
| “I’m actually quite confident that we can reach an agreement,” Schäuble said. | “I’m actually quite confident that we can reach an agreement,” Schäuble said. |
| Over the past week, Berlin has consistently argued against being rushed into a new bailout, preferring to award Greece a new bridging loan to pay off a debt payment of €3.2bn due to the European Central Bank next week. But the temporary loans scenario was barely mentioned by finance ministers as they arrived in Brussels, including the northern and east European eurozone members who have been reluctant to do a deal. | |
| In an abrupt change of tone, they paid tribute to Tsipras, who could only win the vote on the new bailout with the support of the opposition and by splitting his leftwing Syriza movement. It is now likely that Tsipras will call early elections and trigger a realignment of Greek politics. | |
| Instead of questioning the merits of the draft deal struck earlier this week between Greece and its troika of creditors – the European commission, European Central Bank and the International Monetary Fund – the main problems being raised on Friday concerned the issue of debt relief for Greece and whether or not the IMF would take part in the rescue. The IMF is refusing to participate in a new bailout until there is an “explicit and concrete agreement” on debt relief from Greece’s eurozone creditors. | |
| Greece needs to pay €3.2bn to the ECB next week. An agreement on Friday night is expected to see more than €20bn disbursed to Athens before the payment is due on 20 August. | Greece needs to pay €3.2bn to the ECB next week. An agreement on Friday night is expected to see more than €20bn disbursed to Athens before the payment is due on 20 August. |
| Related: Alexis Tsipras is down but far from out | Related: Alexis Tsipras is down but far from out |
| The first of the troika’s quarterly reviews of Greek progress in observing the strict terms of the deal is to take place in October. Depending on the results, the eurozone will then discuss rescheduling Greek debt amid a new consensus among the IMF, the ECB and the commission in Brussels that the level of debt is unsustainable. | |
| There is unlikely to be any direct writedown of nominal debt levels, but moves to reduce the debt could involve extending the repayment schedules and lowering the interest rates. | There is unlikely to be any direct writedown of nominal debt levels, but moves to reduce the debt could involve extending the repayment schedules and lowering the interest rates. |
| Germany is the biggest and most formidable opponent of debt relief, but is also the loudest supporter of keeping the IMF on board. | Germany is the biggest and most formidable opponent of debt relief, but is also the loudest supporter of keeping the IMF on board. |
| IMF involvement in the new bailout was “a precondition” for Berlin, said Schäuble. “We have to see that we can get a clear, possibly binding, commitment from the IMF ... We’ve always said that has to be feasible. The IMF has its own rules but we will have to find a way.” | IMF involvement in the new bailout was “a precondition” for Berlin, said Schäuble. “We have to see that we can get a clear, possibly binding, commitment from the IMF ... We’ve always said that has to be feasible. The IMF has its own rules but we will have to find a way.” |
| An IMF statement supporting the new deal said it would reserve judgment on participation until October. “The IMF will make an assessment of its participation in providing any additional financing to Greece once the steps on the authorities’ program and debt relief have been taken,” it said. The IMF’s managing director, Christine Lagarde, was due to talk to the Eurogroup by phone for part of the meeting, eurozone officials said. | An IMF statement supporting the new deal said it would reserve judgment on participation until October. “The IMF will make an assessment of its participation in providing any additional financing to Greece once the steps on the authorities’ program and debt relief have been taken,” it said. The IMF’s managing director, Christine Lagarde, was due to talk to the Eurogroup by phone for part of the meeting, eurozone officials said. |
| On Thursday the IMF’s call for debt relief was bolstered further when the commission in Brussels, the eurozone’s bailout fund and the ECB raised concerns about the scale of the debt burden. However, the three European institutions opposed the idea of a so-called “haircut”, or reducing the size of the debt. The IMF has said a haircut might be necessary. | On Thursday the IMF’s call for debt relief was bolstered further when the commission in Brussels, the eurozone’s bailout fund and the ECB raised concerns about the scale of the debt burden. However, the three European institutions opposed the idea of a so-called “haircut”, or reducing the size of the debt. The IMF has said a haircut might be necessary. |
| Related: Tsipras could become the leader Greece needs – if he can survive politically | David Patrikarakos | Related: Tsipras could become the leader Greece needs – if he can survive politically | David Patrikarakos |
| Alex Stubb, the Finnish finance minister, admitted as he arrived at the finance ministers’ meeting that the debt relief issue was a problem that needed to be resolved. | Alex Stubb, the Finnish finance minister, admitted as he arrived at the finance ministers’ meeting that the debt relief issue was a problem that needed to be resolved. |
| “We should be honest and open that there is a bit of a Catch-22 to solve here,” he said. “The IMF will be involved only with debt relief, and we want the IMF to be involved but we don’t want debt relief. So some kind of solution will have to be found.” | “We should be honest and open that there is a bit of a Catch-22 to solve here,” he said. “The IMF will be involved only with debt relief, and we want the IMF to be involved but we don’t want debt relief. So some kind of solution will have to be found.” |
| Speaking ahead of the parliamentary vote in Athens, Tsipras had urged MPs to accept the tough bailout terms. He said the rescue package was a “necessary choice” for the nation, saying it faced a battle to avert the threat of a bridge loan – which he called a return to a “crisis without end” - that Greece may be offered instead of a full-blown bailout. | Speaking ahead of the parliamentary vote in Athens, Tsipras had urged MPs to accept the tough bailout terms. He said the rescue package was a “necessary choice” for the nation, saying it faced a battle to avert the threat of a bridge loan – which he called a return to a “crisis without end” - that Greece may be offered instead of a full-blown bailout. |
| The terms for the bailout detail a radical overhaul of the Greek economy, stipulating major reforms of health, welfare, pensions and taxation systems, alongside more ambitious privatisation schemes. It also gives the troika decisive influence over reforms of the country’s struggling banking sector. | The terms for the bailout detail a radical overhaul of the Greek economy, stipulating major reforms of health, welfare, pensions and taxation systems, alongside more ambitious privatisation schemes. It also gives the troika decisive influence over reforms of the country’s struggling banking sector. |