What happens if Greece agrees a bailout deal

What happens if Greece agrees a bailout deal

Athens, June 24, 2015/ Independent Balkan News Agency

By Zacharias Petrou

The SYRIZA-ANEL coalition could struggle to pass the reform program offered to lenders by Alexis Tsipras in Monday Summit of EU leaders.

Even if technical talks develop smoothly and a final staff level agreement is subsequently brought to Wednesday’s Eurogroup meeting and Thursday’s EU Council Summit for approval, the government’s deal with creditors will have to be ratified by Greek parliament.

The proposals don’t appear to have met with much favor from within the coalition, although reaction has been modest so far.

SYRIZA has 149 MPs and ANEL has 13. If 12 out of the 162 coalition lawmakers vote against the deal and the government doesn’t get the majority votes required from its own camp, the 16 MPs of “To Potami” (the centrist party led by Stavros Theodorakis) along with several New Democracy MPs will vote in favor of the deal and rescue it.

However, such an event will almost certainly spark political developments. SYRIZA parliamentary representative Nikos Filis has said that this will lead the country to snap elections while State Minister Nikos Pappas has also stressed that MPs will be expected to demonstrate party discipline. “If the agreement is not approved by the deputies of the governmental majority, the government cannot remain in place,” government spokesman Gabriel Sakellardis told Greek television today.

The Left Platform, which holds about 40 seats in parliament and is composed of former communists and other hardliners closely aligned with labor unions, could defeat the government if its members vote against the plan.

George Saravelos, an analyst at Deutsche Bank calculates that between 10 and 40 Syriza lawmakers could dissent based on local media reports.

On behalf of the Independent Greeks (ANEL) there have been signs that leader Panos Kammenos will not vote in favor of the prospective agreement if it includes the abolition of the reduced VAT rate on Greek islands or/and excessive military spending cuts.

A note by BofA Merrill Lynch Global Research says:

Finalizing the deal could take more than few days. Also, the institutions have made it clear that they will not disburse any money before the Greek parliament approves the needed legislation and implements prior actions. The Parliamentary vote in Greece may take place only in early July, to allow time to draft related legislation and for the usual 3-day parliamentary debate.

European governments and, in some cases, parliaments will also have to approve any deal. These requirements make it unlikely that Greece will receive new official loans by June 30, when an IMF payment of €1.5bn is due.

Therefore, either the ECB could temporarily increase the limit for issuance of T-bills (this is unlikely, as the ECB is ruled-based and it would only do so on the expectation of a completion of review that leads to disbursement), or the IMF could use the available room for a grace period after a country misses a payment, despite recent statements by Ms. Lagarde that there was no such plan (more likely).

According to Reuters it is already too late to release the 7.2 billion euros left in Greece’s bailout before the end of the month, since national parliaments would only approve the disbursement once the Greeks pass laws to enact their reform promises – a process known as “prior actions”.

Two other sources of money could be used to give Greece a lifeline to repay the IMF: 1.9 billion euros in profits from ECB holdings of Greek government bonds bought in 2010-11, which were returned to euro zone member states; or 10.9 billion euros in loans earmarked for recapitalizing Greek banks, which are being held by the euro zone rescue fund.

Either of those sums could be released by a unanimous agreement of the Eurogroup of euro zone finance ministers without prior parliamentary authorization, EU sources said.