Euro zone leaders agreed on the bailout in principle in Brussels on Monday, on the EU’s favorable condition that the parliament of Greece passed reforms on taxation increases and pension curbs by Wednesday. The 7 billion Euros bridge loan was agreed in a conference call on Thursday to tap the EU’s EFSM emergency fund.
ECB and Euro Zone’s Minister Agreed on Greece’s Proposal
At a news conference on Thursday, President of European Central Bank Mario Draghi said emergency funding – ELA – to Greek banks was being raised by 900m Euro over one week. Things have already changed now he said in the news conference and We had a line up of news with the urgent approval of the bridge bailout package, various votes in various parliaments of the EU countries, which have now restored the conditions for a raise in ELA.
The European institutions are now picking up the pace to make sure this rather chaotic show stays on the road. There’s more emergency funding for Greek banks from the ECB. And there’s progress towards agreement on a 7billion Euros bridging loan to get the Greek state through the next few days.
Greece needs to repay 4.2 billion Euros to the ECB on Monday and as well as repaying up all its missed scheduled payments to the IMF. In other words it needs to spend the 7billion Euros almost as soon as it gets it. Officials have been working on ways to ensure that non-euro zone countries are protected from any negative financial consequences of the bridging loan, because the EFSM fund which is being tapped to help Greece involves all EU member states.
Britain and others aren’t happy – especially because David Cameron thought he’d received a cast iron promise (he mentioned it in his election manifesto) that the EFSM would never again be used for euro zone rescues. But some creative financial engineering should ensure that the EFSM deal gets done. Some creative financial engineering should ensure that the EFSM deal gets done. And then attention will turn to negotiations on the three-year bailout programme that Greece has applied for.
Plenty of things can still go wrong. Greek Prime Minister Alexis Tsipras won the parliamentary vote in the early hours of Thursday by majority of 229 votes to 64, but if he needs the continuous support he needs the support of opposition MPs also.
His left-wing Syriza led government in Greece is expected to survive in this critical condition after losing its majority in the parliament because 38 Syriza MPs rejected the reforms he proposed. It paves the way for euro zone finance ministers to open detailed talks on the bailout, worth up to 86billion Euros, and on Thursday they said they agreed in principle to start negotiations.
Finland’s parliament on Thursday approved the bailout talks – one of a number of euro zone states which require a mandate from their own parliament for Greece to secure new funds. Germany’s parliament is due to vote on the deal on Friday. Opposition came from within Mr Tsipras’s own Syriza party along with parliamentary speaker Zoe Constantopoulou calling for the measures social genocide.
Since capital controls were imposed and the banks shut on 29 June, Greeks already imposed a circular and have been limited to cash withdrawing from an ATM 60 Euros a day per card. German Finance Minister Wolfgang Schaeuble, known for his hard-line approach, told national radio he would submit a request for parliament to reopen negotiations on the third bailout with full conviction.