First test for Greek bailout package

A leaked IMF memo suggested that Greece requires much deeper debt relief than that agreed to by the euro zone. Emilio Morenatti / AP Photo

The precarious bailout deal struck between Greece and euro-zone leaders faces its first major hurdle today as the Greek prime minister Alexis Tsipras battles to persuade parliament to agree to a series of far-reaching economic reforms to qualify for extra financial support.

The Greek parliament has until this evening to pass four major pieces of legislation – encompassing reforms of value-added tax, corporation tax and pensions – to unlock about €86 billion (Dh348.59bn).

But Mr Tsipras faces a struggle to sell the reform package to his Syriza party, elected to power in January on an anti-austerity platform, and the Greek population, which voted against austerity measures in the referendum on July 4.

Some Syriza members have suggested they will provide little or no support for the proposed reforms.

Civil servants are due to stage a 24-hour strike in response to the agreement today.

Parliament is nevertheless expected to approve the reforms demanded of it, despite the personal fallout for Mr Tsipras, according to Azad Zangana, a senior European economist at Schroders.

“As expected there are members of government who are unhappy about the deal, but at the same time the opposition are pragmatic and are quite likely to back the deal,” he said.

Mr Zangana said: “Of course it puts Tsipras in a very difficult position, having to rely heavily on an opposition he campaigned vigorously against during the election and the recent referendum.”

Events in the Greek parliament also coincide with discussions among European finance ministers over how bridge loans to Athens should be funded.

The European Commission recommended tapping the European Financial Stabilisation Mechanism (EFSM) to fund the bridging loans, despite protests from some members including Britain and the Czech Republic.

Further complicating matters is a leaked memo that surfaced yesterday, suggesting that the IMF believes that Greece requires much deeper debt relief than that agreed to by the euro zone.

“The dramatic deterioration in debt sustainability points to the need for debt relief on a scale that would need to go well beyond what has been under consideration to date – and what has been proposed by the EFSM,” said the fund’s memo.

The IMF announced on Monday that Greece had missed a €456 million payment, increasing the total amount owed to the IMF to €2bn.

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