Greek prime minister Alexis Tsipras is facing a revolt in his left-wing party and strike calls from workers as he battles to win a parliament vote on a bailout deal to prevent the country’s economy from collapse.
But Mr Tsipras must now keep his own government from collapsing as he tries to push through a deal that he calls “irrational”. Talks on a bailout worth $85 billion will start if parliament agrees today to creditors’ demands, including painful tax increases and pension cuts.
Hardliners in Mr Tsipras’ own cabinet and his radical leftist Syriza party are in open revolt and unions are calling for or extending strikes to coincide with the vote.
After a stunning win in a referendum that rejected calls for more austerity, Mr Tsipras remained in a bind this week as he reached a deal with creditors.
Greece’s cash-starved banks would probably have collapsed, sending the country spiralling out of the euro. So after a marathon eurozone summit, Mr Tsipras agreed to tough new measures that mean economically-battered citizens will pay more for most goods and services by the end of the week.
The bill is expected to pass with votes from opposition parties. But the Tsipras government’s political survival could be in danger if large numbers of its own MPs resign their seats or openly vote against the bill.
Many in Mr Tsipras’ party have indicated they will refuse to vote for the deal because it goes back on election pledges to repeal austerity measures that have been imposed on Greece for years.
Pro-European opposition parties have pledged support for the bailout legislation, but Mr Tsipras could effectively lose his majority in parliament, weakening his ability to push through measures that he had himself vehemently opposed until a few weeks ago.
Mr Tsipras vowed that he would not step down despite the open dissent. “I will not run away from my responsibilities,” he said on state TV.
He criticised the deal, but said it was the best Greece could get.
“The policies imposed on us were irrational,” he said. “We faced a tough and punitive position from our partners. But the (agreement) does offer a way out of the crisis.”
There was speculation Mr Tsipras might choose to reshuffle his cabinet, which would remove dissenters from key positions.
Energy minister Panagiotis Lafazanis called on the prime minister to cancel the legislation before it reached parliament, saying it was forced on Athens by lead eurozone lender Germany and its allies, who had acted like “financial assassins”.
“The deal is unacceptable,” he said. “It may pass through parliament but the people will never accept it and will be united in their fight against it.”
Mr Tsipras’ coalition partner, defence minister Panos Kammenos, who heads the right-wing Independent Greeks party, also condemned the new deal.
“There was a coup. A coup in the heart of Europe,” he said.
The Tsipras government holds 162 seats in Greece’s 300-member parliament. More than 30 of Syriza’s own MPs have publicly voiced objections.
Athens was forced to accept harsh terms to remain in the euro after defaulting on its debts to the International Monetary Fund and closing its banks.
Yesterday the IMF said Greece’s finances were even more dire than previously reported. It said Greece’s debts would peak over the next two years at 200% of the country’s economic output – earlier it had said the debt burden would peak last year at 177%.
The IMF now says Greece needs more debt relief and 85 billion euros in new financing (up from an earlier estimate of around 60 billion euros) through 2018.
It said “Greece’s debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far”.
Greece faces a Monday deadline to repay 4.2 billion euros to the European Central Bank. It also owes the IMF two billion euros.
It will take an estimated four weeks for Greece to access new bailout loans, leaving EU finance ministers scrambling to find ways to get Athens some money sooner.
US treasury secretary Jacob Lew is travelling to Europe to confer with leaders about the Greek crisis, meeting European Central Bank chief Mario Draghi in Frankfurt today and the finance ministers of Germany and France tomorrow.
The months-long stand-off between Greece and its creditors has taken a heavy toll on an economy that had begun the year with a 2.9% growth forecast. Yesterday a Greek small business association said that the new austerity measures would probably cause the economy to shrink for a seventh year, with a 3.5% drop in output.
Greece faced this year’s first bailout deadline back in February. Irish finance minister Michael Noonan said it could have found itself in a much better situation now had it clinched a deal back then, but Greece got its timing wrong during the bailout negotiations.
“It would have been much easier to settle this last February, and it would have been much easier to settle this a fortnight ago”, when Greece shocked its eurozone allies by calling a referendum and seeking to reject their latest proposals, he said.
“From an economic, financial and social point of view it was an absolute disaster, because we all know in democracies that political success and economic success go hand in hand.”