Eurozone Parliaments Back Greek Bailout

Parliaments in the eurozone agree to another bailout for Greece but are growing more skeptical.

Chamber of the German parliament in Berlin, November 11, 2009
Chamber of the German parliament in Berlin, November 11, 2009 (Flickr/Pkabz)

Parliaments in the eurozone voted in favor of another support program for Greece this week but there were signs of rebellion on the left and the right.

In Germany, sixty of Chancellor Angela Merkel’s own Christian Democrats voted against the planned €86 billion bailout — which would come on top of the €240 billion European countries and the International Monetary Fund have lent the Balkan nation since 2010.

Despite Merkel’s insistence that the country would be watched carefully — this time — by its creditors to ensure that what she described as “unprecedented European solidarity” was matched by the implementation of economic reforms, rightwingers are skeptical. Not only has Greece repeatedly reneged on its reform commitments in the past; it now has a far-left government that was elected on promises to end austerity.

The opposition Die Linke criticized Merkel from the other side, saying her policy of financial aid in return for liberal reforms was “destroying Europe.”

The vote still went in the chancellor’s favor. 439 out of 631 lawmakers gave her the authority to negotiate another support program.

Similarly, in the Netherlands, Prime Minister Mark Rutte won the support of lawmakers on Tuesday to negotiate a third bailout even though his own liberal party expressed doubts that the Greeks could be trusted to keep their word.

The nationalist Freedom Party, which is vying for second place in the polls with the pro-European liberal Democrats, voted against.

The liberal Democrats, by contrast, urged Rutte to go further and recognize the need for Greek debt relief. “Why won’t Prime Minister Rutte and his party admit this is in order?” they asked.

Rutte will need the Democrats’ support to get another Greek bailout through the upper chamber of parliament where his own liberals and Labor Party allies don’t have a majority.

Doing so would force the Dutch leader to break his 2012 election promise not to support any more bailouts. “I don’t like it and it’s a bad situation,” he said this weekend after eurozone leaders had reached a last-minute compromise to keep Greece in the single currency.

Two of the three right-wing parties in Finland’s ruling coalition voted against Greece’s second bailout in 2012 when they were in opposition. But a parliamentary committee nevertheless supported the government’s request to start negotiations for a third bailout on Thursday — including the nationalist Finns Party.

In April’s election campaign, the Finns argued against further support for Greece and suggested that the country would be better off leaving the euro. On Thursday, party leader and foreign minister Timo Soini backpedaled, saying “there are no good alternatives” to preventing a Greek default and ejection from the eurozone.

Polls show majorities in Finland, Germany and the Netherlands favor a Greek exit from the euro.

Some in the Greek ruling party favor “Grexit” as well. Panagiotis Lafazanis, the far-left energy minister, defied his own government this week to reject the terms of another bailout. So did Yanis Varoufakis, the former finance minister.

38 out of 149 members of Prime Minister Alexis Tsipras’ Syriza delegation defected or withheld their support in a vote on Thursday morning. Parliament still gave him a mandate to secure a third bailout by 229 votes to 64 thanks the support of opposition parties.

Under the deal struck in Brussels this weekend, Greece is to implement far-reaching economic reforms, including higher sales taxes, pension cuts, a liberalization of the labor market and billions worth of privatizations, before it can access the latest bailout funds.

Greece’s previous two bailouts were paid out in tranches. While nominally conditioned on economic reforms, the country failed to implement many measures its creditors believed were necessary to boost Greek competitiveness and prevent another debt crisis in the future.

Given the rebellion in Tsipras’ party, elections are likely to be called later this year. “If it is not September, it will be October,” Nikos Voutsis, the interior minister, said on Greek radio.

To bridge the period between now and when the third bailout is negotiated, Greece will be allowed to draw €7 billion from the European Financial Stabilization Mechanism, a rescue fund that was set up in 2010. Non-euro countries, like the Czech Republic and the United Kingdom, have contributed to the fund as well, requiring their acquiescence to help Greece.

The country needs the money to pay back €7 billion to the European Central Bank this month. Failure to do so would leave the Frankfurt-based bank with little choice but to stop emergency support for Greek banks.

Greece imposed capital controls after it failed to make a €1.5 billion repayment to the International Monetary Fund last month. Daily cash withdrawals were limited to €60 or €120. With the prospect of a deal, some banks are expected to reopen on Monday.

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