Greek banks to reopen after cash pledge from lenders
Athens, Greece — Greece on Thursday won vital pledges of support from bailout lenders needed to keep its economy from collapsing, but officials in Athens said the painful austerity measures demanded in return were likely to force an election within months.
Hours after parliament approved the tough new cuts, the government promised to reopen banks on Monday and gradually restore services — helped by higher cash support from the European Central Bank.
The ECB announced it was increasing emergency credit to Greek banks, adding another 900 million euros ($980 million) in support over one week. And eurozone lenders pledged short-term loans so Greece can cover its debts and negotiations for a new three-year bailout worth 85 billion euros ($93 billion).
The news buoyed world markets and came as a relief in Greece, where banks and the stock market have been closed for nearly three weeks.
Officials in Prime Minister Alexis Tsipras’ government, however, were still reeling from the contentious post-midnight vote that saw one-in-four lawmakers from Tsipras’ left-wing Syriza party vote against the raft of tax increases, pension cuts and other economic reforms.
Interior Minister Nikos Voutsis said an early election was now seen as “very likely” — either in September or October.
With another austerity vote planned next week, Voutsis cautioned that the level of dissent shown Thursday had fallen just short of toppling Tsipras’ 6-month-old government, which was elected on a pledge to free Greece from debilitating austerity.
In Berlin, Finance Minister Wolfgang Schaeuble insisted that growing calls to ax a portion of Greece’s 320 billion euro debt mountain would not be accepted and again raised the idea of a managed Greek exit from the euro.
“No one knows at the moment how it’s supposed to work without a debt cut, and everyone knows that a debt cut is incompatible with membership in the currency union,” Schaeuble told Deutschlandfunk radio.
However, the head of eurozone finance ministers, Jeroen Dijsselbloem, shot down talk of a Greek euro exit. “Schaeuble,” he said, “If you reach an agreement after such long and hard talks, you have to stand behind it, and that goes for all sides.”
Germany’s insistence on tough terms for Greece even after bailout austerity deepened and extended its six-year recession has earned Schaeuble criticism, even inside Germany.
A Munich-based think tank, Project for Democratic Union, said it was time for Schaeuble to resign.
“Under the Schaeuble regime the eurozone is no union, it is a creditor-debtor relationship,” the group said on its website. While negotiating the Greece deal, Schaeuble “changed the political climate in Europe for the worse.”
U.S. Treasury Secretary Jacob Lew met Thursday with Schaeuble and French Finance Minister Michel Sapin, and urged Greece’s creditors to make sure the struggling country emerges from negotiations with debts it can manage. In a telephone call with Tsipras, he also called on the Greeks to “fully” implement the budget cuts and economic reforms they had agreed to.
In Athens, Deputy Finance Minister Dimitris Mardas said banks would reopen Monday after a three-week closure, though withdrawal restrictions would remain in place.
Bank customers “can deposit cash, they can transfer money from one account to the other,” but they can’t withdraw money except at ATMs, Mardas said.
A withdrawal limit of 60 euros ($67) a day would stay in place, he said, though Greek authorities were working on a plan to allow people to rollover access to their funds. So if, for example, they don’t make it to a cash machine one day, the next day they can take out 120 euros.
European Commission head Jean-Claude Juncker confirmed that an EU-wide bailout fund would give Greece a short-term loan to cover it through mid-August. He said that would allow Greece to meet a debt repayment of 4.2 billion euros ($4.6 billion) to the ECB on Monday and to pay arrears of 2 billion euros to the IMF.
In return for contributing to the bridging loan, European Union members not using the shared euro currency will be given guarantees against risk, Dijsselbloem said. The move follows strong objections raised by Britain toward helping bail out a eurozone member.
“They’ve asked for a guarantee that they will not carry any risk, and I think that’s fair,” the Dutch finance minister said. “We will carry the risks.”
Meanwhile, the Moody’s credit rating agency said the Greek vote meant the country had dodged imminent danger, but that it still faced risks.
“The Greek parliamentary vote averts an immediate disorderly default and potential exit from the euro area, but risk remains elevated given Greece’s weak institutions and substantial political skepticism on the bailout conditions,” it said.