Greek PM faces ‘Gordian Knot’ to pass reforms for deal

ATHENS - Reuters

Greek Prime Minister Alexis Tsipras (front, R) is applauded as he delivers a speech during a voting session at the Parliament in Athens, Greece, July 11, 2015. Reuters Photo

Greek Prime Minister Alexis Tsipras had less than 48 hours to pass a series of pro-market reforms in parliament and smother dissent from hardliners within his own ranks as he races to meet the terms of an unpopular bailout deal.

Having staved off financial meltdown with a new agreement from Greece’s international creditors, Tsipras now faces the anger of lawmakers and the public for agreeing to measures much tougher than those rejected in a referendum on July 5.

The ruling Syriza party and its junior coalition ally held separate meetings to prepare for parliament sittings to pass the laws, which include plans for tax hikes, pension reforms and tighter supervision of the government’s finances.

It was a spectacular turnaround for a Syriza party voted into power in January promising to end years of cuts and recession in a country where a quarter of people are unemployed. There was some speculation, including in Germany’s mass-selling Bild newspaper, which Tsipras could resign.

Comparing the challenge facing the government to the Gordian Knot of mythology that was impossible to untie, Interior Minister Nikos Voutsis was nevertheless confident that Tsipras could muster enough votes in parliament.

“The decisions that will facilitate a return to normality will take place,” Voutsis told reporters.

But investors were less sure. European shares edged lower on July 14 after a four-day rally amid uncertainty over whether the measures would be passed in time.

The party’s junior coalition partner promised to support the government, with the ambiguous caveat that the party would only vote for bailout measures agreed before last weekend’s summit in Brussels, which were less stringent.

“We are committed to voting for what we decided in the council of the political leaders and only that, no other measures that are imposed,” Panos Kammenos, head of the right-wing Independent Greeks, told reporters.

‘Coup’ by creditors

A parliamentary spokesman for Syriza railed against what he described as a “coup” by creditors to force Greece to accept harsh reforms.

Tsipras will probably have to sack some hardline ministers and count on the votes of opposition lawmakers to pass the reforms, which could be clubbed together in one bill on July 15.

One obstacle could be the parliamentary speaker, who is key to the logistics of the vote and has been one of the creditors’ most ferocious critics. Tsipras could try a potentially risky move of forcing her out through a no-confidence vote, although that would eat up precious time and political capital to prepare the reform bills.

“The government finds itself in quicksand after the deal with creditors,” the center-right Kathimerini newspaper said.

“Mr. Tsipras needs to solve a difficult equation as dissenters on July 15 vote may reach or exceed 40,” it said. Tsipras needs 151 of 300 lawmakers to pass the reforms and with the votes of his own party and allies theoretically has 162.

“Mr. Tsipras has decided to first pass the measures in parliament with the support of the opposition parties and then attempt to solve the Gordian Knot.”

There has been a mounting anger at both the government and the creditors, with many Greeks decrying what they saw as a humiliation imposed on them that treated their country like a European colony.

German Finance Minister Wolfgang Schaeuble became the focus of the outrage by floating a proposal during the bailout talks over the weekend for a temporary Greek exit from the euro zone.

According to Germany’s Handelsblatt newspaper on July 14, Schaeuble later suggested in discussions with other eurozone finance ministers that Greece could issue IOUs as a means of interim financing. Schaeuble suggested Athens could use IOUs to serve some of its domestic payment obligations.

“With this deal, the public mandate and the proud ‘No’ of the Greek people in the referendum is cancelled,” said Energy minister Panagiotis Lafazanis, one of the leftist hardliners whom Tsipras must sidestep to implement the reforms.

“The government and the prime minister himself, even at the last minute, have the opportunity to change their mind and take it back, before the parliament decides,” he said in a statement.

“The dilemma posed by the creditors, truce or destruction, is fake and terroristic and has been demolished in the public conscience,” he said.

Tsipras must pass legislation to cut pensions, increase value added tax, clamp down on collective bargaining agreements and put in place quasi-automatic spending constraints. In addition, he must set 50 billion euros of public sector assets aside to be sold off under the supervision of foreign lenders and get the whole package through parliament by July 15.

If the summit on Greece’s third bailout had failed, Athens would have been staring into an economic abyss with its banks on the brink of collapse and the prospect of having to print a parallel currency and exit the euro.

Instead it won conditional agreement to receive a possible 86 billion euros ($95 billion) over three years, provided its European partners are satisfied that the conditions are met.

Fighting its own battle with Brussels to secure reforms of the European Union, British Finance Minister George Osborne has ruled out any financial involvement in a fresh bailout for Greece. The move followed suggestions a mechanism backed by the whole European Union could provide bridge financing for Athens.