Hopes rise of Greece bailout breakthrough

10th July 2015, Comments 0 comments

Fresh Greek bailout reform proposals were cheered by France and Italy on Friday, raising hopes that a last-ditch compromise could be reached with the country's creditors to prevent a dreaded "Grexit."

The plan delivered by Prime Minister Alexis Tsipras's administration for study by the EU, IMF and European Central Bank was to be put to a vote late Friday by Greek lawmakers.

Tsipras has conceded ground on major sticking points including tax and pensions, in a bid to secure a new bailout, drawing encouragement from his biggest ally, French President Francois Hollande.

But he risks alienating a major share of his party's supporters, who rejected in a referendum last Sunday a very similar set of proposals put forward by Greece's creditors.

Some 8,000 people gathered in Athens ahead of the parliamentary vote to protest against carrying on with austerity, police said.

"The Greeks have shown a determination to want to stay in the eurozone because the programme they are presenting is serious and credible," Hollande said.

But he cautioned that "nothing is decided yet." Any new Greek rescue needs to be approved unanimously by eurozone members.

Italian Prime Minister Matteo Renzi declared himself "more optimistic" that a deal would be done.

But Germany, leading a bloc of sceptical eurozone nations, said the outcome of crisis talks this weekend was "completely open."

Greek Finance Minister Euclid Tsakalotos said Friday he believed "many" of his country's demands for debt relief will be accepted by eurozone partners whose ministers will meet Saturday.

He notably expressed confidence that Greece will be permitted to roll over a debt of 27 billion euros ($30 billion) in bonds held by the European Central Bank to the European Stability Mechanism, which would push back repayments.

- Euro, markets soar -

The possibility of a breakthrough sent stock markets soaring in Europe, Asia and the US.

The euro briefly rose above $1.12 for the first time in July before falling back slightly in later trade, still up at $1.1152

Meanwhile the eurozone's major stock markets surged around three percent Friday.

Eurozone finance ministers will make a 'major' decision Saturday on the latest proposals from Athens, Eurogroup chief Jeroen Dijsselbloem said Friday.

"We have to make a major decision. Whichever way," Dijsselbloem, who is also the Dutch finance minister, told reporters ahead of a cabinet meeting in The Hague.

"But we have to see whether the proposals will genuinely help pull Greece from the doldrums," Dijsselbloem added, two days ahead of a summit of EU leaders on Sunday.

The summit bringing together leaders of all 28 EU nations, not just the 19 that use the euro, could yet be cancelled if an agreement is reached beforehand.

However even if that is the case parliaments in several EU nations, notably Germany, will have to vote on whether to accept Greece's reform plan in exchange for another huge bailout -- its third in five years.

In a bid to head off a possible challenge to the measures within his hard-left party Syriza, Tsipras urged his lawmakers "to stand united and firm in front of these important decisions."

The Greek offer, set out in a 13-page document, concedes to Greece's paymasters on several key points that Tsipras's ruling coalition -- and the Greek voters, in a referendum last weekend -- had previously fiercely opposed.

"Greece has come across on almost all issues and has clearly shown its willingness to compromise," said Carsten Brzeski, chief economist at the German bank ING-DiBa.

- Tsipras's gamble -

The reforms agree to creditors' demands to overhaul pensions, increase sales taxes, and commit to privatisations. But they seek to limit changes on other thorny issues, including tax breaks for Greece's islands and cuts to military spending.

The proposal aims to procure financing "for three years, debt adjustment and a front-loaded investment package of 35 billion euros ($38 billion)," a Greek government source said.

Tsipras is taking a political gamble by making any concessions to creditors' demands.

Hardliners in Syriza and coalition partner the Independent Greeks have obstinately rejected further austerity.

Syriza's parliamentary spokesman, Dimitris Vitsas, urged party MPs "to support the government's effort to reach a deal," saying it "kicks off the resolution of the debt issue."

Although Greek voters last Sunday roundly voted "No" to accepting tough austerity terms for a bailout that expired June 30, they are alarmed at capital controls that have closed banks and rationed ATM cash.

They overwhelmingly want to keep the euro.

"The government has to find a deal with its European partners no matter what. We didn't vote 'No' to leave the eurozone," said a pensioner in Athens, Nikos Eftekidis.

But another pensioner, Giorgos, said the "government's proposed measures are very tough, I wasn't expecting that. That's not what the Greeks voted for."

Germany leads a bloc of eurozone nations saying that, after two bailouts over the past five years totalling 240 billion euros, and 107 billion euros in debt forgiveness in 2012, Greece is looking like bottomless money pit.

Tsipras hopes his new offer will pass muster with those hostile eurozone countries, and open the door to creditors discussing another round of relief from Greece's suffocating 320-billion-euro ($350-billion) mountain of debt.

© 2015 AFP

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