Advancing Bailout, Greece Approves 'Terms of Surrender' to Austerity

After a lengthy and tense debate that stretched into the early hours of Thursday morning, the 300-member Greek Parliament voted by a majority of 229-64 to pass what former finance minister Yanis Varoufakis--one of those to vote "No"--is calling the "Terms of Greece's Surrender" to European creditors.

The EUR86 billion bailout comes at a high political and social cost, forcing the imposition of harsh austerity measures and economic reforms tougher than those rejected by more than 60 percent of Greek voters in a July 5 referendum. Among the measures included in the rescue package, which provides for debt restructuring and allows Greece to remain in the Eurozone, are: tax hikes, pension cuts, and the privatization of public property.

Prime Minister Alexis Tsipras acknowledged to lawmakers that he had accepted a package he did not believe in and which would harm Greece, but the alternative was a disorderly bankruptcy and exit from the euro that would be more catastrophic.

"I acknowledge the fiscal measures are harsh, that they won't benefit the Greek economy, but I'm forced to accept them," he said before the vote on Thursday morning.

In his annotated analysis of the agreement, released yesterday, Varoufakis put it more starkly: "The Syriza government must be humiliated to the extent that it is asked to impose harsh austerity upon itself as a first step towards requesting another toxic bailout loan, of the sort that Syriza became internationally famous for opposing."

Indeed, Varoufakis added, the deal appears aimed at "[t]urning Greece into a democracy-free zone modeled on Brussels, a form of supposedly technocratic government, which is politically toxic and macro-economically inept."

However, the Guardianreports:

The threat of Athens being forcibly ejected from the eurozone appeared to focus minds, with more MPs voting in favour of austerity reforms than at any other time in Greece's crisis.

In a vote that saw tensions soar in and outside parliament, Syriza suffered huge losses as 40 MPs revolted against the measures, but pro-European opposition parties delivered their support.

The outcome will significantly weaken Tsipras as the scale of the rebellion sinks in. Stripped of its working majority, the Syriza-dominated, two-party coalition will struggle to enforce the pension cuts and VAT increases outlined in the deal, or to implement any other legislation outside it.

A list of the MPs who voted against the reforms is here.

As Slovakia's Finance Minister Peter Kazimir noted on Twitter following the vote, "The real trouble and challenges may come later. No majority, no ownership could dent implementation of measures & reforms."

European Central Bank (ECB) president Mario Draghi echoed those concerns:

Despite such apprehension, the ECB--one third of the so-called Troika, which also includes the European Commission (Eurogroup) and the International Monetary Fund (IMF)--announced Thursday that emergency credit to Greek banks has been raised by EUR900 million over one week.

The ECB's move indicates that Greek banks, which have been shuttered for almost three weeks, will be able to re-open in short order. According to news outlets, banks are set to re-open on Monday.

But "the beautiful thing about Draghi's intervention," wrote the Guardian, is that he made the prospect of debt relief sound like "the most natural, obvious thing in the world."

At his press conference on Thursday, Draghi said: "It's uncontroversial that debt relief is necessary and I think that nobody has ever disputed that. The issue is what is the best form of debt relief within our framework, within our legal institutional framework. I think we should focus on this point in the coming weeks."

Meanwhile, the Eurogroup on Thursday authorized a EUR7 billion bridge loan to Greece, according to Irish Prime Minister Enda Kenny, making it possible for Greece to pay its most urgent debts in the next few days and paving the way for bailout negotiations to move forward.

As the Wall Street Journal explains, the decision by finance ministers is just one more hurdle the rescue package has to overcome before further talks can even start. Several countries--including Germany and the Netherlands--still have to take up the agreement Thursday and Friday in their own parliaments before the final go-ahead for negotiations is given.