Third bailout for Greece agreed in principle

Rebel MPs in Bundestag resent pressure from CDU to vote Yes to package

A Greek bailout deal has been reached 'in principle', although there remain some minor details to resolve, a European Commission spokesperson says. Video: Reuters

 

The mood in Athens was far from triumphant on Tuesday after a mammoth 23-hour session of negotiation had delivered a deal in principle to facilitate a third bailout for Greece.

The package is set to be approved by Greece’s parliament on Thursday night under emergency procedures, with three pro-European opposition parties backing the government.

Greek officials touted an easing of fiscal targets for the three-year package as their main achievement in negotiations launched after Mr Tsipras reversed his opposition to a third Greek bailout at an EU summit on July 12th.

The government must first implement more than 30 specific reforms dubbed “prior actions”, due to be approved by parliament on Thursday.

These include deeply unpopular measures, such as VAT increases for the Aegean Islands in 2016, increased taxes for farmers and a commitment to ending early retirement for workers in their 50s.

Concerns

Elsewhere in the EU too, there are concerns that the putative deal faces big hurdles.

As well as doubts about Greece’s willingness to implement the package, there are reservations in Germany, the biggest creditor, that negotiators may have cut corners in reaching a deal more quickly than expected. There are also concerns about the willingness of the International Monetary Fund to co-finance the programme alongside the ESM, the EU’s rescue fund.

In Germany, where chancellor Angela Merkel must sell the package to her sceptical conservative CDU/CSU bloc, the Bundestag floor leader of Germany’s ruling Christian Democratic Union (CDU) has come under attack for threatening to demote MPs who refuse to back a third EU/IMF aid package for Greece.

Ahead of next week’s Bundestag vote, CDU floor leader Volker Kauder warned that “those who vote . . . No cannot stay in parliamentary committees where majorities are important such as the budgetary or European committee”.

“This notion of the heroic dissenter bothers me,” he said. “A No is not worth more than a Yes.”

But his threat, rather than focusing backbencher minds ahead of next week’s vote, appears to have backfired, with criticism hailing down from all quarters.

Last month, 60 MPs refused to follow the appeal of chancellor Angela Merkel to give her government a mandate to open talks on a third programme with Greece – twice the number who rebelled against the previous vote to extend the second programme.

Now CDU leaders are concerned that the number of rebels will swell once more at next week’s vote on whether to allow German participation in a third programme.

Despite backbencher misgivings, the CDU-lead grand coalition’s massive four fifths majority in parliament means Dr Merkel is a long way from falling short of the votes she needs.

‘Team spirit’

The row exposes the gap between the principle and reality of life as a German MP inside the walls of the Reichstag. Article 38.1 of the post-war Basic Law says MPs are “representatives of the whole people, not bound by orders or instructions, and responsible only to their conscience”.

In practice, things look a little different: the list system in elections means that conscience-plagued MPs are unlikely to be rewarded with a good spot on the party list at the next election. Rebels who vote against the government line in test votes can expect to be put through the wringer before the final vote.

Meanwhile, a new study suggests that Berlin has been one of the great beneficiaries of the Greek crisis. According to the Leibniz Institute of Economic Research, Germany has saved €100 billion in lower interest payments on sovereign debt as crisis-rattled investors seek safe havens.

“These savings exceed the costs of the crisis – even if Greece were to default on its entire debt,” said the study.

(Additional reporting, The Financial Times Limited 2015)