Greek prime minister Alexis Tsipras is facing a battle to cling on to his government’s majority.
He was recently forced to shred election promises and introduce punishing austerity measures in exchange for a bailout deal with the country’s European creditors.
With members of his own party openly condemning the preliminary rescue deal, Mr Tsipras, who flew home from gruelling night-long negotiations with European leaders, will chair an executive meeting of his Syriza party before MPs begin a two-day debate on the deal, which will heap more tax rises and spending cuts on a nation already suffering through six years of recession.
The deal ensures that Greece avoids an imminent financial catastrophe and an exit from the eurozone, but Panos Kammenos, leader of the junior partner in Mr Tsipras’ coalition government, called the bailout plan a German-led “coup”.
“This deal introduced many new issues … we cannot agree with it,” he said after meeting Mr Tsipras.
Other Greeks rallied outside parliament in Athens, urging MPs to reject the new demands.
Around 30 out of Syriza’s 149 members are likely to vote against the government. Many held private meetings last night.
Mr Tsipras, 40, had to consent to a raft of austerity measures, including sales tax increases and pension and workplace reforms – measures he had campaigned vociferously against over the last five years of Greece’s financial crisis.
Since his election in January, Mr Tsipras has faced intense pressure to backpedal on many of his promises to Greece’s exhausted electorate. Finally, faced by the leaders of the 18 other nations that share the euro and the knowledge that Greek banks were just days away from running out of money, the moment came when he could no longer resist.
A series of supposed red lines vanished, including objections to tight international oversight of Greece’s economy, continued involvement by the International Monetary Fund in Greece’s bailout programme and cuts to pensions.
The result of the marathon negotiations are about €85bn in loans and financial support for Greece over three years that will preserve its membership in the euro, shore up its banks and allow a modicum of stability to return to the battered Greek economy.
Creditors have also dangled the carrot of a possible future debt restructuring in the event of a smooth bailout.
“We managed to avoid the most extreme measures,” Mr Tsipras said.
But in many cases, ordinary Greeks now face tougher measures than those they voted down in a nationwide referendum a little over a week ago.
Syriza’s Left Platform, a group of traditionalists in Mr Tsipras’ own party, swiftly denounced the agreement as the “worst deal possible … (one) that maintains the country’s status: a debt colony under a German-run European Union”.
Experts were divided over the result.
“It was the best deal the Greeks could get,” says Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics. “They did not do too badly given the terrible, terrible, disastrous starting point the current government put them in.”
But Ashoka Mody, visiting professor of international finance at Princeton University, says the deal just repeats policies that have already failed.
“The economics of this programme have been set up for failure,” he said. “In three years, if this programme is implemented, the Greek economy will be 10% smaller than it was and the debt burden will be higher.”
In many ways, Mr Tsipras’ hard work begins now. As part of the deal, his government has to get the Greek parliament to back a series of economic measures by tomorrow that creditors are demanding. And in the weeks to come Greece will have to make further changes to its economy, such as opening to competition industries like energy that have long been protected.
“Trust needs to be rebuilt,” said German chancellor Angela Merkel, adding that with the deal “Greece has a chance to return to the path of growth”.
Passage of the new measures appears assured, since Greece’s opposition parties have pledged to support Mr Tsipras’ deal. But dissent within the ruling Syriza party is threatening his coalition, raising the prospect of some sort of national unity government or an early election later this year.
Greece needs another bailout, its third in five years, to cope with its mountain of debt and get its economy back on track after a six-year retreat that evokes memories of the 1930s Great Depression in the US.
The Greek economy has been pushed to the brink of collapse – banks have been shut down for two weeks and restrictions limit withdrawals to €60 a day and normal business has almost ground to a halt.
When the Greek banks eventually reopen, they will most likely have to depend on more emergency credit from the European Central Bank.
Indications are that the ECB will not sanction further help until the Greek parliament passes the first set of creditor demands tomorrow. And even if the ECB does start raising its emergency liquidity allowance, Greek capital controls are expected to remain for many months more.
Greece has other financing needs beyond its banks.
On July 20, it has to make a €4.2bn debt repayment to the ECB.
It is also in arrears on about €1.5bn owed to the International Monetary Fund.
Since its bailout programme is not going to be in place by then – Jeroen Dijsselbloem, the eurozone’s top official, estimated that would take about four weeks – Greece will need some further help.
If Greece meets all of the requirements spelled out in the agreement, the country will get a three-year rescue programme and the commitment to restructure its debt, which is unsustainably high at around €320bn, or around 180% of its annual GDP.