Cautious optimism grows for Greek deal

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Cautious optimism grows for Greek deal

Finance ministers give mixed signals as Brussels meeting begins, hours after the Greek parliament passed an austerity package.

By Zeke Turner and Matthew Karnitschnig

10/7/15, 12:19 PM CET

Updated 11/7/15, 6:43 PM CET

Eurogroup finance ministers huddled to decide Greece’s future once again Saturday amid mixed signals about the likelihood of a third bailout package for Athens.
One EU diplomat suggested hope for a deal: “The three institutions have made a first joint assessment of the Greek reform proposals submitted Thursday night. Under certain conditions, they jointly see the proposals as a basis for negotiating.”

But German Finance Minister Wolfgang Schäuble, who has been one of Greece’s most critical interlocutors, predicted “unusually difficult negotiations” as he entered the Eurogroup meeting. “We’re dealing with funding gaps that are above and beyond anything we’ve dealt with in the past.”
Aides predicted the meeting would not conclude until much later Saturday evening. “It’s a question of trust,” said one source involved in the discussions.
The Brussels meeting came just hours after Greek Prime Minister Alexis Tsipras pushed tough bailout proposals through parliament early on Saturday despite a rebellion by left-wing members of his Syriza party.
Lawmakers voted 251-32 in favor of the package of budget cuts and tax hikes with eight abstentions, clearing the way for last-ditch negotiations this weekend to avert a “Grexit,” but exposing differences within Tsipras’s administration.
Tsipras, who just last Sunday called on his nation to reject austerity measures in a referendum, hailed the vote as giving him a “a strong mandate to complete the  negotiations to reach an economically and socially viable agreement.”
At the same time, splintering in his party suggested Tsipras could now be forced to make changes to his government.
Energy Minister Panagiotis Lafazanis, who heads Syriza’s far-left wing, and Deputy Labour Minister Dimitris Stratoulis abstained in the crucial vote. Lafazanis said earlier the bailout plan was “not compatible with our program.”
Tsipras acknowledged that the proposals to appease creditors broke his pre-election promises but said they were the only chance of reaching a deal to keep the debt-laden country from crashing out of the eurozone.
“We negotiated hard for Greece but also for Europe to change course. Maybe it won’t be possible now but the seed of democracy and dignity in Europe has been sown,” he told Parliament, highlighting the inclusion of an outline for debt restructuring in the proposals — a key Greek demand.
Germany and other eurozone countries have been skeptical of debt reduction pleas from Athens, although there have been some indications of flexibility in recent days.
Tsipras’s concessions have raised expectations of an agreement on a third Greek rescue package worth about €53 billion that would give the government breathing space to fulfill its often delayed promises to reform the economy and restore growth.
The reform proposals are also seen as the only way to keep Greece in the euro, something that the overwhelming majority of Greeks say they want. EU leaders made it clear earlier this week that if there is no agreement with Greece by Sunday, then they will start making preparations for Greece to quit the single currency.
Many Greeks are now wondering why Tsipras called on them to vote No to fresh austerity measures in a referendum on Sunday that showed overwhelming rejection of further belt-tightening.
Some see it as an effort by Tsipras to enlist the support of opposition parties in bailout negotiations and hush dissent within Syriza ranks by showing he pushed creditors as hard as possible for a better deal.
Finance Minister Euclid Tsakalotos said the government reform package was an improvement on the plan offered by European Commission President Jean-Claude Juncker before talks broke down late last month.
“We can’t deny that there are recessionary steps but it will depend on what happens with the debt (relief) and on the growth measures,” he told lawmakers.
Some members of the so-called Left Platform rejected the bailout proposals and called for a return to the drachma currency that Greece abandoned in 2002.
The proposals presented to the country’s creditors include privatizations, cuts to defense and social security spending and the raising of the VAT on restaurants and on holiday islands.
The latter measure is opposed by Panos Kammenos, leader of the right-wing nationalist Independent Greeks, a coalition partner of Syriza, but he voted with the government on the reform draft.
Tsipras secured the support of the main opposition parties to negotiate a deal with lenders after Sunday’s referendum, which helped the proposals win parliamentary approval.
“We want an agreement by Sunday to stay in Europe,” said Vangelis Meimarakis, interim leader of the of the conservative New Democracy party.
“Go to negotiate and bring back a deal.”
Helen Popper contributed from Athens.
http://www.politico.eu/article/tsipras-austerity-grexit-greece-reform-bailout-merkel-vote-default-debt/