Greece on Wednesday geared up for a parliamentary vote on draconian reforms demanded by eurozone creditors in exchange for a huge new bailout, just hours after a bombshell report from the International Monetary Fund criticised the deal.
The outcome of the crucial vote was far from clear after the IMF issued a stark warning that Greece would need far more debt relief to stop it crashing out of the common currency than European governments have so far been willing to contemplate.
The last-ditch deal struck Monday saw Prime Minister Alexis Tsipras agree to sweeping changes to labour laws, pensions, VAT and other taxes — many of which had been rejected by voters in a public referendum — in exchange for new funds to keep Greece’s struggling economy alive.
The parliament in Athens must approve the deal before the 18 other eurozone leaders start negotiations over what Greece is to get in return: a three-year bailout worth up to 86 billion euros ($95 billion), its third rescue programme in five years.
Under the new plan, eurozone governments will contribute between 40 and 50 billion euros, the IMF will contribute another major chunk and the rest will come from selling off state assets and the financial markets, a European official said.
Tsipras has predicted “the great majority of Greek people” will support the deal, but admits he “cannot say with certainty” that it will be enough to stop Greece exiting the eurozone — a so-called “Grexit” — until the final bailout agreement is signed.
A senior IMF official also said the fund would only participate in a third bailout if its EU creditors produce a clear plan. The current deal “is by no means a comprehensive, detailed agreement”, the official said.
It was not the first time the IMF has urged greater debt relief. But political analysts questioned why the strongly-worded report — which creditors were aware of on Sunday, two days before it was published — appeared not to have been taken into account in the agreement.
The revelations put greater strain on Tsipras, who has been forced to turn to pro-European opposition parties to get the reform measures through parliament in the face of opposition from some 30 rebel lawmakers in his own radical left Syriza party.
The embattled premier said he took “full responsibility” for signing an accord he did “not believe in, but which I signed to avoid disaster for the country” as it teetered on the brink of economic collapse.
“A prime minister must fight, speak the truth, take decisions and not run away,” Tsipras said in an interview on Greek public television, when asked whether he would resign if the reforms fail to pass or he loses his parliamentary majority.
Tsipras ally Panos Skourletis, minister for employment, urged lawmakers to “vote for the bill”, saying the government would “reduce the painful consequences of this agreement”.
But Syriza’s hardline leftists, lead by Energy Minister Panagiotis Lafazanis, were reported by Greek media to have decided not to vote for the measures but call instead for a return to the drachma.
Polls published late Tuesday by Kapa Research found 72 percent of Greeks surveyed thought the deal was necessary, with the majority blaming Europe for the “tough measures”, but many see it as a humiliating climbdown for a country still reeling from years of painful austerity.
Civil servants went on strike Wednesday, the first big stoppage since the 40-year-old took power. But despite the turmoil his popularity seemed undented, with 68.1 percent of people saying that if the political fallout from the vote should result in a new coalition, it should be led by Tsipras.
Under the deal, Greek assets for privatisation will be parked in a special fund worth up to 50 billion euros, with some 25 billion euros of the money earmarked to recapitalise Greece’s banks.
Tsipras said the establishment of the fund meant ordinary Greeks’ savings were safe, but added that the reopening of the banks — which have been closed for over a week — depended on the finalising of the deal, which could take a month.
The European Central Bank has been keeping Greek banks afloat with emergency liquidity, but it could be forced to cut off that aid if Greece misses a huge debt repayment due on Monday.
European governments on Tuesday also clashed over options to help Greece meet its short-term cash needs while it waits for a eurozone bailout deal to be finalised, likely to take at least four weeks.
In a sign of the ongoing concern about the global fallout of the Greek crisis, US Treasury Secretary Jacob Lew will travel to Germany and France on Wednesday and Thursday for talks with top officials.
If Greece does pass the agreement, Europe’s next step would be to push the deal through several national parliaments, many in countries that are loath to afford Athens more help.