The approval by eurozone finance ministers of a third bailout for Greece paves the way for the disbursement of crucial rescue loans this week but also heralds a new period of political upheaval for Prime Minister Alexis Tsipras due to a widening rift in leftist SYRIZA.
The European Stability Mechanism is expected to approve the first tranche of the 86-billion-euro bailout on Wednesday. Some 26 billion euros will be disbursed in the first instance: 10 billion for Greece’s cash-strapped banks, with most of the rest to go toward paying off a 7.2-billion-euro bridge loan and covering a 3.2-billion-euro repayment to the European Central Bank on Thursday. As with previous bailouts, the loans come at a heavy price.
The bailout foresees new spending cuts and tax increases, which has prompted vehement reactions in the far-left of SYRIZA, as well as sweeping structural reforms that previous governments have failed to implement. These include an overhaul of the pension system, the opening of closed professions and the liberalization of markets.
Greece’s lenders secured the backing of creditor states, many of which were extremely skeptical of giving Greece another chance, by linking the disbursement of aid to strict “conditionality” and budget targets.
Another key commitment by Greece is the establishment of a privatization fund, which must be operational by the end of this year and into which some 50 billion euros in state assets are to be transferred over the duration of the new three-year program.
The question of relieving Greece’s huge debt burden is to be addressed after the program’s first review in late October.
On the domestic front, Tsipras is expected to ask soon for a vote of confidence in Parliament after seeing 43 of his MPs decide not to support the third bailout deal in a ballot that took place on Friday morning.
The defections meant that just 118 coalition lawmakers voted for the agreement, which is just below the absolute minimum of 120 that the government would need to survive a confidence motion.
However, sources close to the prime minister told Kathimerini that Tsipras would aim to secure a minimum of 151 votes in the ballot of 300 MPs. If he fails to meet this target then early elections will be called.