Greek PM Alexis Tsipras has announced he is stepping down and has called an early election.
Alexis Tsipras had faced a rebellion within his ruling hard-left Syriza party over a new bailout deal which has been agreed with international creditors.
Greece received the first €13 billion ($14.5 billion) tranche on August 20, allowing it to repay a debt to the European Central Bank (ECB) and avoid a messy default.
However, the austerity measures needed for the deal angered many in his party.
Alexis Tsipras had to agree to further painful state sector cuts, including far-reaching pension reforms, in exchange for the bailout – and keeping Greece in the eurozone.
The overall bailout package is worth about €86 billion over three years. The payment of the first tranche was made on August 20 after the bailout deal – Greece’s third in five years – was approved by relevant European parliaments.
Photo AP
Alexis Tsipras made the announcement in a televised state address on August 20.
The prime minister said that with the first tranche of the bailout arriving, he now had the moral duty to ask the Greek people to deliver their judgment.
He said he would seek the vote of the Greek people to continue his government’s program.
Alexis Tsipras said Greeks would have to decide whether he had represented them courageously with the creditors.
He will visit President Prokopis Pavlopoulos later in the evening to submit his resignation. Greece will then be run by a caretaker government.
Reacting to the news, Martin Selmayr, European Commission President Jean-Claude Juncker’s chief-of-staff, tweeted that “swift elections in Greece can be a way to broaden support” for the bailout deal.
Some 43 of Syriza’s 149 members of parliament had either opposed the bailout or abstained in the August 14 parliamentary vote that approved the deal.
The rebellion meant Alexis Tsipras, who was elected this January, had effectively lost his parliamentary majority.
Alexis Tsipras had won power on a manifesto of opposing the stringent austerity conditions that he has now accepted.
He said he was forced to do so because a majority of Greeks wanted to stay in the eurozone, and this could not be achieved in any other way.
Greece remains under strict capital controls, with weekly limits on cash withdrawals for Greek citizens.
According to the Greek constitution, if a government resigns within a year of election, the president will ask the second-largest party – in this case the conservative New Democracy – to try to form an administration.
If this fails, the next largest party must be given a chance.
However, analysts say both parties can waive this and allow the president to approve the snap election.
Greece’s parliament has passed a second set of reforms, meaning that negotiations on an €86 billion European Union bailout can begin.
The reforms include changes to Greek banking and an overhaul of the judiciary system.
Thousands of protesters demonstrated outside of parliament as the bill was debated, with protests briefly turning violent as petrol bombs were thrown at police.
There had been fears of a rebellion by lawmakers but PM Alexis Tsipras was easily able to muster the support required. In total, the measures received 230 votes in favor and 63 against with five abstentions.
The debate ended at 04:00 local time.
Among those who voted against were 31 members of his own Syriza party. However, this represents a smaller rebellion than in last week’s initial vote.
Former Greek Finance Minister Yanis Varoufakis was one of those rebels in the first vote who returned to vote with the government this time.
Yanis Varoufakis wrote that he felt it was important to preserve the unity of the government, even if he believed the program was “designed to fail” by Greece’s creditors.
Speaking before the vote, Alexis Tsipras stressed that he was not happy with the measures that creditors had imposed.
“We chose a difficult compromise to avert the most extreme plans by the most extreme circles in Europe,” he told parliament.
Representatives of the European institutions that would provide the bailout funds will begin negotiations in Athens on July 24.
Last week, Greece passed an initial set of austerity measures imposed by its creditors. These were a mix of economic reforms and budget cuts demanded by the eurozone countries and institutions before bailout talks could continue.
This second set of measures passed early on Thursday morning were of a more structural nature, including:
a code of civil protection aimed at speeding up court cases
the adoption of an EU directive to bolster banks and protect savers’ deposits of less than €100,000
the introduction of rules that would see bank shareholders and creditors – not taxpayers – cover costs of a failed bank
More contentious measures – phasing out early retirement and tax rises for farmers – have been pushed back to August.
On July 22, the European Central Bank (ECB) increased its cash lifeline to Greek banks.
The emergency injection of an extra €900 million, the ECB’s second in a week, came just hours before the vote.
The International Monetary Fund (IMF) confirmed on July 20 that Greece had cleared its overdue debt repayments of €2.05 billion and was no longer in arrears.
The repayments, which included €4.2 billion to the ECB, were made possible by a short-term EU loan of €7.16 billion.
Greece’s next major deadline is August 20, when it must pay €3.2 billion owed to the ECB, followed by a payment of €1.5 billion to the IMF in September.
The protest in Athens’ Syntagma Square – called by Greece’s public sector union – was reported to have been largely peaceful, until a number of petrol bombs were thrown in the direction of police.
German parliament is debating a motion on whether to allow negotiations on Greece’s €86 billion bailout deal.
Opening the debate, Chancellor Angela Merkel warned of “predictable chaos” if deputies did not back the plan.
The deal is expected to be passed despite opposition from the left and some members of Angela Merkel’s conservative party.
Greece’s parliament has already voted in favor of hard-hitting austerity measures required for a third bailout deal.
On July 16, the European Central Bank (ECB) raised the level of emergency funding available. This has paved the way for Greek banks, which shut nearly three weeks ago, to reopen on July 20.
However, credit controls limiting cash withdrawals to €60 a day will only be eased gradually, officials say.
Eurozone ministers have also agreed a €7 billion bridging loan from an EU-wide fund to keep finances afloat.
Chancellor Angela Merkel told German lawmakers ahead of today’s vote that the deal was hard for all sides, but said it was the “last” attempt to resolve the crisis.
“We would be grossly negligent, indeed acting irresponsibly if we did not at least try this path,” she said.
A number of eurozone countries require parliamentary approval to go ahead with bailout talks, including Austria, which is also voting on July 17. Both the French and Finnish parliaments have already backed the deal.
Meanwhile, there have been fresh calls for Greek debt relief measures from International Monetary Fund (IMF) chief Christine Lagarde – echoing a call from Greek PM Alexis Tsipras.
Christine Lagarde told France’s Europe 1 the IMF would participate in a “complete” Greek package that includes debt restructuring, as well as an “in-depth reform” of the Greek economy.
Greece has debts of €320 billion and is seeking its third international bailout. Last month it became the first developed country to fail to make a repayment on a loan from the IMF.
The Greek bank closures have been one of the most visible signs of the crisis.
From July 20, a weekly limit on withdrawals may replace a daily cap, Greek Deputy Finance Minister Dimitris Mardas suggested.
“If someone doesn’t want to take €60 on Monday and wants to take it on Tuesday, for instance, they can withdraw €120, or €180 on Wednesday,” he told Greek ERT television.
The announcements from the ECB and the Eurogroup came after Greek lawmakers passed tough reforms on taxes, pensions and labor rules as part of the new bailout deal.
A rise in value added tax (VAT) from 13% to 23% will kick in on July 20, affecting food and drink in restaurants, taxi fares, selected supermarket items, public transport and plane and ferry tickets.
PM Alexis Tsipras faced opposition to the deal from lawmakers within his left Syriza party. He is widely expected to announce a cabinet reshuffle on July 17.
Greece will receive a €7 billion bridging loan from an EU-wide fund to keep its finances afloat until a bailout is approved, eurozone ministers have agreed.
The loan is expected to be confirmed on July 17 by all EU member states.
In another development, the European Central Bank (ECB) agreed to increase emergency funding to Greece for the first time since it was frozen in June.
The decisions were made after Greek lawmakers passed tough reforms as part of a eurozone bailout deal.
The bridging loan means Greece will be able to repay debts to the ECB and IMF on July 20.
Greek banks, which have been closed for nearly three weeks, could also reopen on July 20, Greek media reported, although credit controls will remain in place.
Eurozone leaders agreed on the bailout in principle in Brussels on July 13, on the condition that the Greek parliament passed reforms on taxation increases and pension curbs by July 15.
The €7 billion bridge loan was agreed in a conference call on July 16 to tap the EU’s EFSM emergency fund.
At a news conference on July 16, ECB President Mario Draghi said emergency funding – ELA – to Greek banks was being raised by €900 million over one week.
“Things have changed now,” he said.
“We had a series of news with the approval of the bridge financing package, with the votes, various votes in various parliaments, which have now restored the conditions for a raise in ELA.”
Greek PM Alexis Tsipras won the parliamentary vote in the early hours of Thursday by 229 votes to 64, but needed the support of opposition lawmakers to do so.
His left-wing Syriza-led government is expected to survive, despite losing its majority after 38 Syriza lawmakers rejected the reforms.
It paves the way for eurozone finance ministers to open detailed talks on the bailout, worth up to €86 billion, and on July 16 they said they agreed “in principle” to start negotiations.
Finland’s parliament on July 16 approved the bailout talks – one of a number of eurozone states which require a mandate from their own parliament for Greece to secure new funds.
Germany’s parliament is due to vote on the deal on July 17.
Hours after Greece’s parliament passed tough reforms required for a third bailout deal, the eurozone ministers have met to discuss on emergency funding to keep Greek banks afloat.
The Eurogroup was also due to discuss next steps in negotiating the bailout.
The Greek government is expected to survive, despite losing its majority after 38 lawmakers voted against the reforms.
Later, the European Central Bank is to consider easing a funding squeeze on Greek banks, allowing them to reopen.
Greece is facing an immediate cash crisis, with banks there closed for more than two weeks.
The European Commission has proposed giving Greece a €7 billion “bridging” loan from an EU-wide fund to help the government pay its mounting debts.
Eurozone ministers have agreed in principle to extend the loan to Greece, according to an unnamed official speaking to Bloomberg. The loan will be announced on July 17 after national parliaments have voted on the bailout deal, the official added.
Eurozone leaders agreed on the bailout in principle in Brussels on July 13, on the condition that the Greek parliament passed reforms on taxation increases and pension curbs by July 15.
PM Alexis Tsipras won the parliamentary vote by 229 votes to 64, but needed the support of opposition lawmakers to do so.
The vote paves the way for eurozone finance ministers to open detailed talks on the bailout, worth up to €86 billion.
Finland’s parliament on July 16 approved the bailout talks – one of a number of eurozone states which require a mandate from their own parliament for Greece to secure new funds.
Germany’s parliament is due to vote on the deal on July 17.
Passionate opposition came from within Alexis Tsipras’ own Syriza party, with parliamentary speaker Zoe Constantopoulou calling the measures “social genocide”.
Former Finance Minister Yanis Varoufakis was another vocal opponent.
In his address to parliament Alexis Tsipras said: “I acknowledge the fiscal measures are harsh, that they won’t benefit the Greek economy, but I’m forced to accept them.”
Since capital controls were imposed and the banks shut on June 29, Greeks have been limited to withdrawing €60 a day.
German Finance Minister Wolfgang Schaeuble, known for his hardline approach, told national radio he would submit a request for parliament to reopen negotiations on the third bailout with “full conviction”.
He also said he believed a temporary “Grexit” – Greece leaving the eurozone – would perhaps be a better option.
Meanwhile Slovakia’s Finance Minister Peter Kazimir said in a tweet he welcomed “the positive vote” but said “this is the easier part of the deal”.
By July 22, Greece must also commit to a major overhaul of the civil justice system. It has to agree to more privatization, to review collective bargaining and industrial action, and make market reforms, including Sunday trading.
The Greek parliament vote on July 16 approved:
VAT changes including a top rate of 23% to take in processed food and restaurants; a 13% rate to cover fresh food, energy bills, water and hotel stays; and a 6% rate for medicines and books
An increase in corporation tax from 26% to 29% for small companies
An increase in luxury taxes on big cars, boats and swimming pools
An end to early retirement by 2022, increasing the retirement age to 67
Opponents of the bailout measures took to the streets of Athens in mainly peaceful protests ahead of the vote on Wednesday. However, one group threw petrol bombs at police officers who responded with tear gas.
Unions and trade associations representing civil servants, municipal workers and pharmacy owners also went on strike on July 15.
Greece will offer new proposals to creditors ahead of an emergency EU summit planned for June 22, State Minister Alekos Flambouraris has said.
Alekos Flambouraris also told Greek media he believed the European Central Bank (ECB) would not allow the country’s banks to collapse.
Reports say billions of euros have been withdrawn from Greek banks in the past week.
The summit comes amid attempts to prevent Greece defaulting on a €1.6 billion IMF loan repayment.
The European Commission, the IMF and the ECB are unwilling to unlock bailout funds until Greece agrees to reforms.
They want Greece to implement a series of economic changes in areas such as pensions, VAT and on the budget surplus before releasing €7.2 billion of funds, which have been delayed since February.
Details of the new proposals have not yet been released.
Greek PM Alexis Tsipras has said he believes “there will be a solution based on respecting EU rules and democracy which would allow Greece to return to growth in the euro”.
However, German Chancellor Angela Merkel has warned there must be a deal between Greece and its creditors ahead of June 22 summit.
Otherwise, Angela Merkel said, the summit would not be able to make any decision.
Alexis Tsipras was due to hold further talks with his negotiating team in Athens on June 20.
Greece has less than two weeks before the IMF loan repayment is due.
If Greece fails to make the repayment, it risks having to leave the eurozone and possibly also the EU.
On June 19, the European Central Bank (ECB) approved more emergency help for Greece’s banks. The amount of extra funding has not been officially disclosed.
Reuters news agency said withdrawals by Greek savers between Monday and Friday reached about €4.2 billion, which represents about 3% of household and corporate deposits held by Greek banks at the end of April.
Close to €1 billion was withdrawn on Friday alone, the financial website Euro2day said.
“There are no lines [queues] or panic, it has been a quiet and gradual phase of withdrawals,” one banker told Reuters.
The Bank of Greece has warned for the first time that the country could be on a “painful course” to default and exit from both the eurozone and the EU.
The central bank’s warning comes as the government and its international creditors blamed each other for failing to reach a deal over economic reforms.
That failure is holding up the release of €7.2 billion in bailout funds.
About €30 billion was withdrawn from Greek bank deposits between October and April, the central bank added.
The central bank also warned Greece’s economic slowdown would accelerate without a deal.
“Failure to reach an agreement would… mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country’s exit from the euro area and, most likely, from the European Union,” the Bank of Greece said in a report.
“Striking an agreement with our partners is a historical imperative that we cannot afford to ignore.”
Finance Minister Yanis Varoufakis, when asked if there could be an agreement at the meeting of euro zone finance ministers in Luxembourg on June 18, said: “I do not believe so.”
He said preparatory work for the meeting had not gone far enough for a deal.
Greek shares fell sharply again. The Athens General Index closed 3.2% lower which takes its loss for the past four trading sessions to almost 19%.
Austrian Chancellor Werner Faymann was in Athens on June 17 in a last-ditch bid to end the standoff.
“For Europe to be stronger, it must show solidarity and support to any country which needs it,” Werner Faymann said during a meeting with Greek President Prokopis Pavlopoulos.
That came ahead of a meeting of euro zone finance ministers on June 18 although officials have played down expectations of a make-or-break decision being reached.
The Austrian chancellor’s comments followed a harsher critique from European Commission President Jean-Claude Juncker, who on June 16 accused the Greek government of misleading voters, as Greek PM Alexis Tsipras accused the EU and International Monetary Fund (IMF) of trying to “humiliate” his country.
Greece has two weeks remaining to strike a deal with its creditors or face defaulting on an existing €1.6 billion loan repayment due to the IMF.
The country has already rolled a €300 million payment into those due on June 30.
Jean-Claude Juncker said the Greek government had not told the truth about its latest reform proposals.
“I am blaming the Greeks [for telling] things to the Greek public which are not consistent with what I’ve told the Greek prime minister,” he said.
PM Alexis Tsipras has said that the lenders wanted to raise VAT on electricity.
Other Greek ministers have criticized suggestions to increase sales tax on medicines.
Jean-Claude Juncker said: “I’m not in favor, and the prime minister knows that… of increasing VAT on medicaments and electricity. This would be a major mistake.”
“The debate in Greece and outside Greece would be easier if the Greek government would tell exactly what the Commission… are really proposing,” he added.
YanisVaroufakis claimed that EU proposals did include VAT increases: “Juncker either hadn’t read the document he gave Tsipras – or he read it and forgot about it.”
Elsewhere in the eurozone, Portugal’s short-term borrowing costs rose sharply on June 17, with yields on six-month treasury bills jumping from minus 0.002% to 0.044% at the country’s latest debt auction.
The rise came despite an assurance to investors from Portuguese PM Pedro Passos Coelho that his country would not be “the next to fall” in the event of a Greek default.
France’s President Francois Hollande has warned that there is “little time” to prevent Greece from leaving the eurozone.
On a visit to Algiers, Francois Hollande said the ball was firmly in Greece’s court.
“It’s not France’s position to impose on Greece further cuts to smaller pensions, but rather to ask that they propose alternatives,” the French president said on June 15.
“We have to get to work… everything must be done in order that Greece remains in the eurozone.”
Talks with Greek and EU officials in Brussels on June 14 failed to reach an agreement that would release bailout funds to Greece.
Eurozone finance ministers will meet on June 18, but Greek Finance Minister Yanis Varoufakis said he did not plan to present new proposals at the meeting.
Yanis Varoufakis told German newspaper Bild: “The Eurogroup [of eurozone finance ministers] is not the right place to present proposals which haven’t been discussed and negotiated on a lower level before.”
The prospects of a Greek default in just over two weeks’ time has worried investors.
On June 15, the FTSE 100 in London fell 1.1% to 6,710 points, while the DAX in Frankfurt lost 1.9% and the CAC 40 in Paris shed 1.75%.
In the US, the Dow Jones closed down 0.6%, or 107 points, at 17,791.
Athens’ benchmark ATG index, which fell 5.9% on Friday, fell a further 4.7% on June 15.
Greek bank stocks were hit hardest, with National Bank of Greece closed down 5.7% and Bank of Piraeus was 12.2% lower.
Europe wants Greece to make spending cuts worth €2 billion to secure a deal that will unlock bailout funds.
Greece must repay more than €1.5 billion of loans to the International Monetary Fund (IMF) at the end of June and promise further economic reforms to receive about €7 billion of bailout funds.
The funds have been delayed by three months amid growing fears the government will soon run out of money.
Sticking points between Greece and the IMF and EU remain reforms to VAT and pensions.
European Commission spokeswoman Annika Breidthardt rejected an assertion that creditors were seeking pension or wages cuts. They only wanted Athens to phase out early retirement and remove “incorrect incentives for early retirement”.
Greece had already agreed to specific targets for its primary surplus, she said, with 1% of GDP this year, followed by 2% in 2016 and 3.5% by 2018.
An opinion poll for Greece’s Mega TV found that more than two thirds of respondents believe the Greek government will have to back down, with just 19.4% thinking the lenders will agree to further concessions.
On June 15, Greek PM Alexis Tsipras warned Athens would stand its ground until its creditors become “realistic”.
Alexis Tsipras called on the IMF and EU to “meditate” on the idea that: “We are not only the heirs of a long history of struggle. We are also carrying on our shoulders the dignity of a people, and the hope of the peoples of Europe.”
Greece’s biggest banks stocks have plunged on the Athens Stock Exchange, following a fresh blow to the country’s debt negotiations.
Stocks in the National Bank of Greece fell almost 6%, while Piraeus and Alpha banks fell more than 5%.
IMF officials pulled out of talks with Greek politicians in Brussels on June 11, citing “major differences”.
Greece is seeking to avoid defaulting on a €1.5 billion debt repayment to the IMF.
The payment is due by the end of the month.
Shares on the Athens Stock Exchange had soared on June 11 amid renewed optimism about Greece’s talks with its creditors.
The index climbed more than 14% – the best performance in several weeks.
But the IMF’s withdrawal has dampened investors’ moods.
On June 12, Jeroen Dijsselbloem, president of the Eurogroup of finance ministers, said a deal without the IMF was “unimaginable”.
However, German Chancellor Angela Merkel urged all parties to continue negotiations.
Speaking at a business conference in Berlin, Angela Merkel said: “Where there’s a will there’s a way, but the will has to come from all sides so it’s important that we keep speaking with each other”.
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