Greece clears final reform hurdle before new bailout talks

Greek lawmakers have overwhelmingly approved a new batch of reforms demanded by the country's international creditors in return for a third multi-billion euro bailout.

The vote followed a whirlwind debate that ended at 4 a.m. Thursday.

Addressing parliament before the vote Prime Minister Alexis Tsipras made an appeal to lawmakers to back the reforms, saying they were a necessary price to pay to keep Greece alive after stormy talks with its creditors nearly collapsed earlier this month.

“We have chosen a compromise that forces us to implement a program in which we do not believe, and we will implement it because the alternatives are tough,” he told lawmakers. “We are summoned today to legislate under a state of emergency.”

“We made tough choices, and I personally made difficult, responsible choices. Today we must all redefine the possibilities ahead of us given the new circumstances,” he said. “We chose a difficult compromise to avert the most extreme plans by the most extreme circles in Europe.”

Tsipras also ruled out resigning, and although he once again suffered a revolt among members of his own leftist Syriza party, but had no trouble passing the draft legislation with the backing of pro-European opposition parties.

The bill — containing judicial and banking reforms — easily passed with the support of 230 lawmakers in the 300-seat parliament thanks to the support of pro-euro opposition parties. But 36 out of 149 deputies from his Syriza party voted against the overall bill or abstained — less than the rebellion by 39 deputies in last week's vote on an initial set of reforms.

The reforms were the final prerequisite before Greece can start negotiations with creditors on a third bailout worth around 85 billion euros, or $93 billion. 

Failure to have approved them would have derailed the bailout and rekindled fears over Greece's future in the shared euro currency.

A first set of reforms that focused largely on tax hikes and budget discipline triggered a rebellion in Syriza last week and passed only with votes from pro-EU opposition parties.

In Brussels, Pierre Moscovici, the European Union's top economy official, said he hopes the bailout deal can be signed by mid-August, although he acknowledged that means Greece has to meet a “punishing” schedule.

The bill that lawmakers voted on early Thursday covered rules for dealing with failed banks and speeding up the justice system — two more conditions set by the euro zone and IMF to open negotiations on the latest bailout.

Tsipras has publicly said he disagrees with measures demanded by Greece's euro zone peers and the IMF for talks to proceed on a third bailout to save the country from bankruptcy.

But after he made a U-turn by accepting a deal at the 11th hour to keep his country in the euro, he told party hardliners to face reality and back the package.

Even so, hardline lawmakers from the Syriza party, who opposed last week's bill, rejected this week's law as well and complained about the length of the bill, which covered more than 900 pages.

The government has said it hopes negotiations on the bailout deal can start this week and be wrapped up by Aug. 20.

Earlier this week, in signs of a return to normal, Greek banks reopened on Monday and Athens paid debts due to the European Central Bank and International Monetary Fund. The ECB increased its emergency funding by 900 million euros, the same amount it provided last week.

On Tuesday, Standard & Poor's upgraded Greece's sovereign credit rating by two notches.

But fresh austerity measures are hard to accept in a country whose economy has contracted by a quarter during five years of crisis and where unemployment is more than 25 percent. Before the debate got underway, about 10,000 people demonstrated outside parliament, protesting the latest measures to overhaul Greece's judicial and banking sectors. Minor violence marred the end of the protest when a few teenagers threw Molotov cocktails at riot police, but no injuries or arrests were reported. there was no repeat of the violence seen last week.

With mistrust among euro zone countries still high despite the deal struck last week to launch bailout talks, a senior German lawmaker in Chancellor Angela Merkel's conservative party warned Greece it would not get aid if it backtracked on reforms.

“We are keeping a close eye on whether Athens not only adopts the reforms but also implements them,” Gunther Krichbaum, chairman of the German parliament's Europe committee, told the newspaper Bild. “Greece must fulfil the conditions, otherwise the money cannot flow.”

The bill does not include pension reforms curbing early retirement or increasing tax rates paid by farmers — a step strongly opposed by the conservative New Democracy party and many Syriza deputies.

The fact that these measures were not included in the bill aroused some media speculation that Athens was backtracking on reform commitments. Finance Minister Euclid Tsakalotos told lawmakers Greece had agreed with its lenders to deal with these issues during bailout talks.

The bill adopts into Greek law new EU rules on dealing with failed banks, imposing losses on shareholders and creditors of ailing lenders before any taxpayers' money can be tapped in. It also toughens law on foreclosures, though Tsipras pledged his government would not allow banks to seize primary residences.

It also includes the reform of the judicial system, which is similar to a law that Syriza had opposed before it came to power, and which hardline Left Platform lawmakers particularly oppose.

Greece's creditors say the measure is needed to speed up court proceedings and reduce their cost. Greek leftists say it violates rights to a fair hearing and could favor creditors and hurt workers in bankruptcy cases.

Wire services