Though still highly fluid, there was growing optimism that Greece would be able to overcome the deep-seated mistrust among some of its creditor nations — particularly Germany and a number of eastern European nations. But it was by no means assured.
“The plan is weaker in some areas than it should be,” Dutch Finance Minister Eric Wiebes told reporters in Brussels.
Officials from several nations were still decrying their shattered faith in Greek Prime Minister Alexis Tsipras, who campaigned against a cash-for-cuts deal a week ago only to present them now with a three-year plan pledging years of more austerity and pain. In return, Greece is asking for more than 53 billion euros (about $59 billion). But European officials say the country will likely need an even bigger package of at least 72 billion euros.
Hard-hit Greek banks need to be quickly recapitalized to the tune of 10 billion to 15 billion euros, according to a Greek banking source who spoke on the condition of anonymity because of the sensitivity of the issue. In addition, the recent brinksmanship by Tsipras’s government forced Greek banks to close June 29 to prevent a run on the financial system, delivering a hard blow to the economy and upping the amount it will now take to stabilize the nation.
How Greece went from victory to economy-destroying defeat
Greece’s creditors are also closely monitoring the political climate in Athens. Although the Greek Parliament approved the bailout proposal in an early-morning vote Saturday, a sizable faction of Tsipras’s party refused to back it — including members of his own cabinet. Fifteen members of Syriza abstained or skipped the vote altogether. Two people objected to it.
The insurgency raised immediate questions about Tsipras’s ability to implement the sweeping package of spending cuts and tax increases that are estimated to total 12 billion to 13 billion euros. The prime minister probably will be forced to replace some of his top lieutenants, and some of his advisers have urged him to hold a new round of elections in the fall.
“What guarantees can Greece give they are actually going to implement what they propose?” asked Austrian Finance Minister Hans Jorg Schelling, according to German news outlet Der Spiegel.
After the long debate in Parliament to back the proposal, Tsipras hailed the vote. “The Parliament gave us tonight a strong mandate to finish the negotiation and pass a viable and just agreement,” Tsipras told Parliament. “Our priority now is the negotiation. Everything else in the right time.”
A thumbs-up by finance ministers Saturday, however, would not mean an immediate deal. Rather, it would be a green light to begin hashing out a formal agreement. Greek officials were pushing for something close to a final draft of a new bailout deal before markets open Monday.
Yet sticking points remained, particularly on the timing of pledged tax increases and pension cuts. Even if finance ministers agree to open talks, it was no guarantee that a final deal would be reached.
Greek officials, however, were hoping to persuade creditors to at least issue a backing strong enough to allow the European Central Bank to lift its cap on emergency lending to Greek banks. Without such a move, the banks may need to further tighten capital controls that already limit ATM withdrawals to 60 euros per day.
What 60 euros a day can buy you
The ECB has allowed the banks to access an 89 billion-euro lifeline that expires Monday. The money is just enough to keep Greece’s financial system running, but more will be needed to stabilize the banks.
Whether the ECB decides to give the green light to more aid will depend on the outcome of this weekend’s negotiations. According to a person familiar with the situation, the ECB could gradually increase its cap on emergency funding as the financial system regains its footing.
“There are plenty of options,” said the official, who spoke on condition of anonymity to discuss ongoing negotiations.
But even if Greece reaches a broad agreement with its creditors and banks are allowed to open their doors, some restrictions on withdrawals and transactions probably will remain in place.
“Capital controls are here to stay for a while,” the official said.
Those Greeks who voted against austerity in a referendum last Sunday, meanwhile, were torn between pragmatism and feelings of betrayal over the Tsipras move to now agree to a deal.
“I am concerned and sad,” said Stavroula Gioka, 24, a university student. “I believe that we came to a point where there was nothing else we could do and so did the government. We have to accept this outcome.”
Yiannis Kontopoulos, a 71-year-old retiree, was angry about the Greek move to cave in to creditor demands. He was now putting his faith in the German lawmakers, who need to approve any deal. “Right now, my only hope is that the German Parliament will not accept our proposal,” he said.
Ahead of the Saturday meeting, French officials, who sent advisers to help Greece craft its proposal, lobbied for leniency, and President François Hollande described the offer as “serious and credible.”
But Germany, the largest creditor nation, is likely to be a decisive voice, and hard questions were still being asked in Berlin. German officials were calling for signs of follow-through by the Greeks, and the strong endorsement of the proposal by the Greek Parliament might help.
This is the third bailout that Athens has asked for in five years. Greece had sought an extension of its previous program, but now it is to start a wholly new one.
“The situation of the expired old program does not exist anymore,” German government spokesman Steffen Seibert told reporters in Berlin. “Therefore, what we need is a new, multi-year program which in its requirements and commitments by far exceeds what was discussed at the end of June.”
Yet there seemed to be a slight opening by the Germans on the thorny but pivotal issue of easing Greece’s crippling debt, even if slightly. German Finance Ministry spokesman Martin Jäger said a major debt-slashing was out of the question. But he left open the possibility of a debt restructuring that eases Greece’s terms, saying the intent was not to “significantly reduce the cash value of the debt.”
A commitment by Greece’s lenders to address its debt could sweeten the deal for Athens. As Friday’s debate over the bailout stretched into Saturday morning, Tsipras held out that potential as a crucial victory.
“I hope we are nearing the end of a battle,” he said before Parliament. “Sooner or later, this seed of dignity and democracy will bear fruit for other Europeans.”
But for some Greeks — primarily from the prime minister’s own party — there remained only one solution: to leave Europe and its austerity regime behind.
A small contingent of the bailout’s most ardent opponents gathered Friday night in Syntagma Square in front of Parliament. Petro Vaios, 20, handed out leaflets and carried a sign on his backpack that read, “No bailouts, old or new.”
The protest was a mere shadow of the throngs that filled the streets after last Sunday’s referendum. Vaios said he knew he was fighting for a lost cause.
“After five years of austerity, we now know for sure that the European way has not led us anywhere,” he said. “If we follow the same path, it’s like committing suicide.”
When asked how he felt about Tsipras, the leader who moved from open resistance to desperation in the space of a week, Vaios only smiled and replied, “It’s a tricky question.”
