Greece, Its Back to the Wall, Adopts Austerity Steps

By SUZANNE DALEY and JAMES KANTERJULY 15, 2015

The New York Times

ATHENS — Under threat from the nation’s creditors to move quickly or lose any chance of obtaining a desperately needed new bailout package, Greece’s Parliament approved painful new austerity measures early Thursday, virtually guaranteeing that life would get harder for millions of Greeks.

With banks closed and the economy on the verge of collapse, Prime Minister Alexis Tsipras had urged the adoption of the measures, saying that while it was a difficult deal the creditors were offering, it was the only one available and would avert a humanitarian and fiscal disaster.

The measures passed easily, with a vote of 229 to 64, with six abstentions. Yet much of the support came from opposition parties. Thirty-two members of Mr. Tsipras’s own Syriza party voted no, including three of his ministers, throwing the stability of his left-wing coalition government into question.

Mr. Tsipras, who unexpectedly took the floor before the vote to make his case that the country could move forward even under the harsh terms of what was being offered, left immediately after the roll call.

The vote came a day after the International Monetary Fund signaled that it might not back the new bailout unless the pact substantially reduced the debt burden on Athens. That stance aligned it with Mr. Tsipras on the question of debt reduction and provided him with new ammunition to argue that the bailout plan did not do enough to get the Greek economy back on its feet.

But with the country teetering on the edge of insolvency, Athens moved ahead with the vote. It needed to begin unlocking the aid necessary to meet a debt payment on Monday, put its banks on sounder footing and negotiate a three-year package that would provide it with as much as 86 billion euros, or about $94 billion, in assistance.

Mr. Tsipras was given only two days to begin to pass the creditors’ proposals. And as the vote neared, many in his party expressed profound dismay that they were being asked to approve measures that would reduce pensions and raise a wide array of taxes. One minister resigned before the vote.

In his address to the deputies, the prime minister made no secret of his unhappiness with the offer, which had forced him to backtrack on virtually every campaign promise he made and which many leading economists have condemned as unworkable.

But Mr. Tsipras said the alternative — exile from the eurozone — was the greater evil.

“We took on powerful opponents, we clashed with international financial system,” he said. “And in that sense it was an uneven battle. But I’m proud of our fight.”

But some members of his party had argued earlier that more austerity betrayed all that the party stood for and could not be accepted, especially after 60 percent of Greek voters had already rejected less harsh terms in a referendum just 10 days before.

“The people spoke,” said one Syriza member, Zoi Konstanpopoulou, the speaker of Parliament. “We have a duty to defend their decision because our power is sourced from them.”

Whether Mr. Tsipras will have to fashion a new coalition is unclear. Some party members suggested that with no one calling for a vote of confidence or a new election, he might be able to hang on.

Other analysts said that he would no doubt eventually have to form a new unity government with other parties.

While Mr. Tsipras signed an agreement with his creditors on Monday, there are still many potential pitfalls, including the fact that the accord must win parliamentary approval in each of the other eurozone countries. France has already given its approval, and German legislators could take up the issue by Friday. On Thursday, finance ministers are to discuss bridge financing for Greece until the terms of a longer agreement can be worked out.

Members of Syriza welcomed the I.M.F. report. Dimitrios Papadimoulis, a member of the European Parliament who is close to the prime minister, said that the fund’s position could be helpful in the long run but that did not make Wednesday’s parliamentary vote any less urgent.

He said the fund’s position had provided an “additional argument” for reducing his country’s debt payments, but that right now Greece needed to “stay alive” and approve the measures demanded by its European creditors.

The I.M.F.’s signal on Tuesday that it supported steps like forgiving some of the debt or putting a three-decade moratorium on debt payments put it in conflict with Greece’s European creditors.

Under the terms of the agreement, reached after a weekend of contentious negotiations, the creditors would not forgive any debt and offered only a general assurance of further discussions about reducing annual debt payments by stretching out payment periods or reducing interest rates.

The bailout would be the third for Greece in five years and would involve new loans from the other countries that use the euro, the European Central Bank and the monetary fund.

The fund’s decision to go public with its position suggested that the draft agreement would be only the starting point for further negotiations about the sustainability of the debt and the willingness of lenders to recognize that they might not get all their money back.

In Athens, tensions flared as Parliament prepared to vote. When the controversial former finance minister, Yanis Varoufakis, took the floor to compare the deal reached over the weekend in Brussels to the Treaty of Versailles, which imposed harsh conditions on a defeated Germany after World War I, one member of the center Right Democracy Party interrupted him to shout, “You ruined the country.” Mr. Varoufakis, who along with Mr. Tsipras had taken a confrontational stance with the creditors, said he would not vote for the legislation.

Opposition party members took turns blaming Mr. Tsipras for the current state of affairs, but vowed to vote for the measures anyway. Harry Theoharris, of the centrist To Potami party, said that 10 years from now students would be studying the events of today and “how we shot ourselves and then started whining for a disability benefit.”

If nothing else, Greeks took some solace from the idea that the I.M.F. report would help keep attention focused on the issue of the debt, which Greece had long maintained was so heavy a burden that it choked off hope of any economic recovery and forced unjustifiably deep cuts in government spending.

“Certainly this issue is also going to be part of the discussions, negotiations when we’ll be discussing the memorandum of understanding, when we will be really preparing the third Greek program,” Valdis Dombrovskis, a vice president of the European Commission responsible for the euro, told the news media in Brussels.

The I.M.F.’s position highlighted a rift between European countries. Some, including Germany, are adamantly against writing off any of Greece’s debt of more than €300 billion, or about $330 billion. Others, including France, have stressed the need to reduce Greece’s debt payments to a more realistic and sustainable level, if not by forgiving any of the debt then by extending the payment schedule or cutting interest rates.

The French government, which has played a central role in efforts to keep Greece in the eurozone, said it welcomed the fund’s comments.

“The I.M.F. is saying the same thing that we are,” Michel Sapin, the French finance minister, told BFM television on Wednesday. “That we have to help Greece, but that we can’t do it if we maintain the same repayment burden on the Greek economy.”

Wolfgang Schäuble, the German finance minister, has been one of the most hard-line opponents of debt relief for Greece.

He indicated on Tuesday that there was continued resistance in the German government to the deal forged last weekend and a willingness to consider whether it might be better for Greece to leave the eurozone.

Chancellor Angela Merkel of Germany has ruled out writing off any of the Greek debt, but has left the door open to renegotiating the terms for paying it back, suggesting that there remain grounds for a compromise.

Correction: July 15, 2015

Because of an editing error, an earlier version of this article included an erroneous conversion of the 86-billion-euro debt package. It equals about $94 billion, not $78.5 billion.

Suzanne Daley reported from Athens, and James Kanter from Brussels. Jack Ewing contributed reporting from Frankfurt.