Pressed by left, Greece's Tsipras vows 'thus far and no further'

ATHENS | BY RENEE MALTEZOU AND ANGELIKI KOUTANTOU

Thu Jul 30, 2015 2:00am BST Related: WORLD

Reuters

Greek Prime Minister Alexis Tsipras, struggling to contain a revolt in his left-wing Syriza party, said on Wednesday that his government would not implement reform measures beyond those agreed with lenders at a euro zone summit this month.

Tsipras faces a tough Syriza central committee session on Thursday with many activists angered by his acceptance of bailout terms more stringent than those voters rejected in a July 5 referendum.

In a clear warning to Syriza rebels, Tsipras said he could be forced to call early elections if he no longer had a parliamentary majority, and suggested an emergency party congress could be held in early September.

At the same time, he is under pressure from Greece's creditors to go beyond the two packages of so-called prior actions passed by parliament and include unpopular steps to curb early retirement and tax breaks for farmers, EU sources say.

"I know well the framework of the deal we signed at the euro zone summit on July 12," Tsipras told Sto Kokkino radio. "We will implement these commitments, irrespective of whether we agree with it or not. Nothing beyond that."

With Greece close to the financial abyss last month, the government closed the banks for three weeks and Tsipras was forced to make the major concessions on reform and austerity to open negotiations on a third bailout of up to 86 billion euros (£60.7 billion).

In a setback for government efforts to restore more economic normality, the Athens stock exchange will stay closed probably until the end of a fifth week because banks need to adapt IT systems to enforce limits on trading by Greeks.

A European Commission spokeswoman declined to say what additional measures Athens was expected to take before the conclusion of the new bailout, although she said earlier this week more reforms were due before the first aid is disbursed.

Tsipras said Greece's primary budget balance before debt service would break even at best or show a deficit this year, depending on a financial situation that has deteriorated sharply since the imposition of capital controls on June 28.

The Brussels summit agreement did not specify fiscal targets but Athens had previously been expected to achieve a primary surplus equivalent to 1 percent of annual Greek economic output this year and 2 percent in 2016.

Germany's Der Spiegel magazine reported that the creditors were willing to allow a gentler fiscal path taking account of Greece's return to recession, provided Athens pursued economic and administrative reforms more energetically.

"PLAN C"

With the banking squeeze easing, the European Central Bank kept its cap on emergency funding for Greek banks unchanged on Wednesday after Athens did not request another increase, a source familiar with the decision said.

The Athens Stock Exchange has been shut since June 29 after the government closed the banks, rationed cash withdrawals and imposed capital controls to stop a run on deposits by savers and companies.

The ECB gave Greece the go-ahead on Tuesday to reopen the stock market without restrictions for foreign investors, but with limitations for local investors to avert the risk of further capital outflows.

"The Greek banks need to resolve some IT issues regarding the restrictions," a spokeswoman for the exchange said.

European Commission spokeswoman Nina Andreeva, keen not to add to Tsipras's domestic woes, praised the conduct of the bailout talks so far, brushing aside security and access issues.

"We are satisfied with the smooth and constructive cooperation with the Greek authorities and that should now allow us to progress as swiftly as possible," she told reporters.

Intensive talks with officials from the Commission, the ECB, the International Monetary Fund and the euro zone's rescue fund, the European Stability Mechanism, began on Monday.

On Wednesday, the two sides opened technical talks on energy issues, including the fate of power grid operator ADMIE, an energy ministry official told Reuters.

Under the Brussels deal, Greece committed to selling ADMIE unless replacement measures that would open up competition in the market can be found.

The leftist government halted the sale of a 66 percent stake in the grid operator, fully owned by the biggest electricity utility PPC, when it came into power in January. Newly appointed Energy Minister Panos Skourletis said last week the state should take over ADMIE due to its strategic importance and the government would look to alternatives to privatising it.

Tsipras faces an uncertain vote in the 200 member Syriza central committee with sacked former energy minister Panagiotis Lafazanis leading a leftist faction that rejected the July 13 deal and is demanding a tougher line with the creditors.

Compounding his problems, former finance minister Yanis Varoufakis continues to denounce the agreement in daily media interviews and articles, accusing the creditors of trampling on Greek sovereignty and justifying his own secret planning while in office to set up an alternative currency.

"It was a financial war," Varoufakis told Germany's Stern magazine in the latest interview released on Wednesday. "Today you don't need tanks to beat someone. You've got your banks."

A Greek prosecutor has opened an investigation into whether any laws were violated during his covert contingency planning, court officials said on Wednesday.

The inquiry will not focus on Varoufakis himself, since courts cannot investigate ministers or lawmakers who enjoy parliamentary immunity from prosecution. Varoufakis, who was finance minister from January until he quit in July, remains a member of parliament.

Instead it will look into media reports of the plan to see whether crimes such as violation of personal data protection and breach of duty were committed.

A group of lawyers filed a suit this week seeking the inquiry. A statement from Varoufakis's office said: "Their aim is to register the January-July period as a 'great' mistake or even 'better' to criminalise the five-month tough negotiations by the government of the Left."

(Additional reporting by Lefteris Papadimas and Deepa Babington in Athens and Francesco Guarascio in Brussels; Writing by Paul Taylor; editing by David Stamp)