Germany’s parliament approved a third bailout for Greece on Wednesday after Finance Minister Wolfgang Schaeuble argued the country should get "a new start," while in Athens the government agonized over whether to call a snap election.
The Bundestag’s vote cleared one of the final obstacles to Greece getting funding so that it can make a 3.2 billion euro debt repayment to the European Central Bank on Thursday.
But a sizeable number of conservative lawmakers rebelled against Chancellor Angela Merkel, objecting to pouring yet more billions into Greece.
In Athens, Prime Minister Alexis Tsipras and his inner circle debated whether to take on anti-bailout rebels within his own radical left Syriza party by calling a parliamentary confidence vote or to go straight to early elections.
Popular misgivings about more aid for Athens run deep in Germany, the eurozone country which has already contributed most to Greece’s two previous bailouts since 2010.
But Tsipras secured the third program by promising to impose reform and austerity policies that are so onerous that a sizeable number of Syriza lawmakers rejected the deal in parliament last Friday.
Schaeuble, who took a tough negotiating stand with Greece as it came close to financial collapse, admitted he wasn’t sure whether the Tsipras government would stick to its promises.
Nevertheless, he urged the Bundestag before the vote to back the new package which offers bailout loans worth 86 billion euros ($95 billion).
"Of course, after the experience of the last years and months there is no guarantee that everything will work and it is permissible to have doubts," he said.
"But in view of the fact that the Greek parliament has already passed a large part of the measures it would be irresponsible to not use the opportunity for a new start in Greece," he said, making the case for the government.
The Bundestag, whose backing is essential for the release of bailout funds, approved the plan by 454 votes to 113, with 18 abstentions. Altogether 63 of the 311 conservative members voted against and a further three abstained.
Support from parties including the Social Democrats, Merkel’s junior coalition partner, and the opposition Greens ensured the approval. However, the rebellion delivered a blow to Merkel’s authority.
If the third bailout is completed, Greece will have taken 320 billion euros in loans from the eurozone and International Monetary Fund, although it has paid back some of it, including interest.
Greek banks also already owe the ECB and Bank of Greece a further 110 billion euro, mostly in emergency loans provided to save the financial system from collapse.
This – and a possible forced Greek exit from the eurozone – was narrowly averted at the end of June when Athens closed the banks for three weeks and imposed capital controls on money leaving the system. These have since been eased slightly, but not removed.
Make up your mind time
Greek ministers have spoken openly about the possibility of a parliamentary confidence vote leading to elections since Tsipras had to rely on opposition lawmakers to win approval for the bailout on Friday.
But Deputy Culture Minister Nikos Xydakis said on Wednesday that Tsipras had yet to make up his mind, possibly considering a delay until the first review of progress under the new bailout, which Greece’s creditors will conduct in October.
"There are two views in order to have a strengthened government – elections either before or after the first bailout review. It is a decision the prime minister will make," he told the state TV channel ERT.
Former energy minister Panagiotis Lafazanis, who leads a hard left faction within Syriza, has already taken a step toward breaking away from the party by calling for a new anti-bailout movement.
On Wednesday Lafazanis repeated his opposition to the bailout and signalled he might refuse to support Tsipras in any confidence vote. "We … will not under any guise or pretext give the ‘green light’ to anyone to implement this third bailout," he told the Real.gr news website.
On Friday, support for the government from within its own coalition parties fell below 120 votes, the minimum needed to survive a confidence vote if some others abstain in the 300 seat parliament.
Tsipras has held a series of meetings with senior ministers, including on Tuesday with Finance Minister Euclid Tsakalotos who negotiated the bailout, and Energy Minister Panos Skourletis on Wednesday.
"It’s a matter of hours for the prime minister to decide his next steps on the political front, maybe a matter of 24 hours," a government official said, without indicating whether this decision might involve a confidence vote leading to elections.
The speculation has led to opposition accusations that Tsipras, who remains popular despite his U-turn on resisting austerity, wants elections simply to deal with his own internal rebellion. Tsipras won power only in January and fresh elections would be the third in as many years.
A big question ahead is whether the Greece will get any longer-term debt relief – possibly by having its repayment schedule stretch out.
The European Union wants the IMF involved in the bailout, but the latter says it that as things stand it can’t because Greece’s debt is unsustainable.
Eurogroup President Jeroen Dijsselbloem said the EU and IMF would be able to find a compromise in the form of lower interest rates and longer repayment terms.
Some pressure on Greece is easing a little already. The ECB has cut emergency liquidity assistance for Greek banks on Tuesday, several sources said. This was a positive sign that lenders are stabilizing their operations and building cash reserves.
However, Greek bankers said "mattress cash" – billions of euros that panicky savers pulled out of their accounts before the capital controls were imposed – has yet to return.
"With capital controls in place there is money coming into the banking system that cannot leave immediately," said one senior banker, declining to be named.
"When public sector employees get their monthly salary payments, the money does not flow out as before," he added. "But it is not that we are seeing any sizeable return of mattress cash, not yet."