Urgent Billions

An E.U. Lifeline for Bitterly Divided Greece

tsipras in parliament reuters
It was a fierce fight for Alexis Tsipras - this time not with the lenders, but with the Greek parliament.
  • Why it matters

    Why it matters

    Greece has embarked on the difficult path toward a third bailout, yet its prime minister is vulnerable after suffering a huge party rebellion.

  • Facts

    Facts

    • The Greek prime minister had to rely on the opposition to push austerity measures and the bailout deal through parliament.
    • The E.U. plans to use the EFSM bailout fund to extend a €7 billion loan for 3 months.
    • The ECB is meeting to discuss its current €89 billion cap on emergency lending to the Greek banking system.
  • Audio

    Audio

  • Pdf

It has been a bruising week for the young Greek prime minister, Alexis Tsipras.

After caving in at the make-or-break summit last weekend in Brussels, he had to return to the gladiatorial pit of the Greek parliament to plead for a deal he clearly didn’t believe in.

In the small hours of Thursday morning, the parliament finally passed a raft of tough measures, demanded by its lenders in order to clear the way for talks on a controversial new bailout estimated at more than €80 billion – the country’s third bailout in five years.

The vote helped unlock much-needed bridge funding from Greece’s European partners, but has also made the political situation in Greece even more unstable.

On Thursday, euro-zone finance ministers cleared the way for a €7 billion short-term financing package to keep Greece afloat until it secures a third bailout. The E.U. Commission’s president, Jean-Claude Juncker, said the emergency package should help Greece’s government pay its bills until mid-August.

The so-called Eurogroup of finance ministers from the 19 countries that make up the euro zone also gave the go-ahead for negotiations to start on Greece’s third bailout package in five years. The next step will be for parliaments in a number of euro zone countries to approve the start of talks in the coming days. Germany’s Bundestag is expected to debate the issue on Friday.

The European Central Bank did its part as well on Thursday to loosen the stranglehold on Greece’s banks, which have been closed to customers since June 29. ECB President Mario Draghi said the central bank would raise its cap on emergency loans to the banking sector by €900 million. It’s a small amount to start – the cap had for the past two weeks been held at just under €90 billion – but it is one that a Greek banking insider said should allow Greece’s banks to reopen on Monday after three weeks of shutting their doors to the public.

The moves come after a fraught night in Athens.

As thousands of demonstrators clashed with riot police on the streets of Athens, parliamentarians held a heated debate. Finally, after midnight, they held a vote, in which Mr. Tsipras won the backing of 229 of the 300 members of parliament to enter into negotiations on a third bailout.

Mr. Tsipras faced a significant rebellion from the hard left of his own Syriza party, who opposed the raft of “prior action” measures on issues such as VAT and pensions that Greece had to pass before it could even start any bailout talks.

In total, 38 members of the radical left party refused to support him.

The prime minister has now lost his coalition majority and could only pass the bill with the help of pro-European opposition parties.

Want to keep reading?

Subscribe now or log in to read our coverage of Europe’s leading economy.